I
119THCONGRESS
1
STSESSION H. R. 2603
To amend the Internal Revenue Code of 1986 to simplify reporting require-
ments, promote tax compliance, and reduce tip reporting compliance
burdens in the beauty service industry.
IN THE HOUSE OF REPRESENTATIVES
APRIL2, 2025
Mr. L
AHOOD(for himself and Ms. DELBENE) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to simplify
reporting requirements, promote tax compliance, and re-
duce tip reporting compliance burdens in the beauty serv-
ice industry.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Small Business Tax 4
Fairness and Compliance Simplification Act’’. 5
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SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EM-1
PLOYER SOCIAL SECURITY TAXES PAID WITH 2
RESPECT TO EMPLOYEE TIPS TO BEAUTY 3
SERVICE ESTABLISHMENTS. 4
(a) E
XTENSION OFTIPCREDIT TOBEAUTYSERVICE 5
B
USINESS.— 6
(1) I
N GENERAL.—Section 45B(b) of the Inter-7
nal Revenue Code of 1986 is amended by striking 8
paragraph (2) and inserting the following new para-9
graphs: 10
‘‘(2) A
PPLICATION ONLY TO CERTAIN LINES OF 11
BUSINESS.—In applying paragraph (1) there shall 12
be taken into account only tips received from cus-13
tomers or clients in connection with the following 14
services: 15
‘‘(A) The providing, delivering, or serving 16
of food or beverages for consumption, if the tip-17
ping of employees delivering or serving food or 18
beverages by customers is customary. 19
‘‘(B) The providing of beauty services to a 20
customer or client if the tipping of employees 21
providing such services is customary. 22
‘‘(3) L
IMITATION ON APPLICATION TO BEAUTY 23
SERVICES.—Paragraph (2)(B) shall not apply for 24
purposes of determining the credit allowed under 25
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subsection (a) with respect to any taxpayer for any 1
taxable year unless— 2
‘‘(A) the aggregate amount of tips taken 3
into account by such taxpayer as an employer 4
for such taxable year under paragraph (1)(A) 5
with respect to services described in paragraph 6
(2)(B), exceeds 7
‘‘(B) 15 percent of the taxpayer’s gross re-8
ceipts with respect to the services described in 9
paragraph (2)(B) for such taxable year.’’. 10
(2) B
EAUTY SERVICE DEFINED .—Section 45B 11
of such Code is amended by adding at the end the 12
following new subsection: 13
‘‘(e) B
EAUTYSERVICE.—For purposes of this sec-14
tion, the term ‘beauty service’ means any of the following: 15
‘‘(1) Barbering and hair care. 16
‘‘(2) Nail care. 17
‘‘(3) Esthetics. 18
‘‘(4) Body and spa treatments.’’. 19
(b) C
REDITDETERMINEDWITHRESPECT TOMIN-20
IMUMWAGE INEFFECT.—Section 45B(b)(1)(B) of the 21
Internal Revenue Code of 1986, is amended— 22
(1) by striking ‘‘as in effect on January 1, 23
2007, and’’; and 24
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(2) by inserting ‘‘, and in the case of food or 1
beverage establishments, as in effect on January 1, 2
2007’’ after ‘‘without regard to section 3(m) of such 3
Act’’. 4
(c) E
FFECTIVEDATE.—The amendments made by 5
this section shall apply to taxable years beginning after 6
December 31, 2024. 7
SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR. 8
(a) I
NGENERAL.—Section 3121(q) of the Internal 9
Revenue Code of 1986 is amended— 10
(1) by striking so much as precedes ‘‘of this 11
chapter’’ and inserting the following: 12
‘‘(q) T
IPSINCLUDED FOR BOTHEMPLOYEE AND 13
E
MPLOYERTAXES.— 14
‘‘(1) I
N GENERAL.—For purposes’’; and 15
(2) by adding at the end the following new 16
paragraph: 17
‘‘(2) T
IP PROGRAM SAFE HARBOR .—In the case 18
of an employer who employs one or more employees 19
who receive tips in the course of such employment 20
which are attributable to the performance of beauty 21
services (as such term is defined in section 45B) are 22
considered remuneration for such employment under 23
this section, no IRS tip examination with respect to 24
such employer shall be initiated (except in the case 25
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of a tip examination of a current or former em-1
ployee) if the employer— 2
‘‘(A) establishes an educational program 3
regarding applicable laws relating to proper re-4
porting of tips received by employees for— 5
‘‘(i) new employees, which shall in-6
clude both verbal explanation and written 7
materials, and 8
‘‘(ii) existing employees, which shall 9
be conducted quarterly, 10
‘‘(B) establishes procedures for tipped em-11
ployees to provide monthly reporting of cash 12
and charged services and related tip income of 13
at least $20 under section 6053(a), 14
‘‘(C) complies with all applicable Federal 15
tax law requirements applicable to employers 16
for purposes of filing returns, and collection 17
and payment of taxes imposed, with respect to 18
tip income received by employees, and 19
‘‘(D) maintains employee records related 20
to— 21
‘‘(i) contact information for such em-22
ployees, and 23
‘‘(ii) gross receipts from any services 24
subject to tipping, and charge receipts for 25
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such services, for a period of not less than 1
4 calendar years after the calendar year to 2
which the records relate.’’. 3
(b) E
FFECTIVEDATE.—The amendments made by 4
this section shall apply to taxable years beginning after 5
December 31, 2025. 6
SEC. 4. INFORMATION REPORTING OF INCOME FROM 7
SPACE RENTALS IN THE BEAUTY SERVICE IN-8
DUSTRY. 9
(a) I
NGENERAL.—Subpart B of part III of sub-10
chapter A of chapter 61 of the Internal Revenue Code of 11
1986 is amended by adding at the end the following new 12
section: 13
‘‘SEC. 6050Z. RETURNS RELATING TO INCOME FROM CER-14
TAIN RENTALS OF SPACE IN THE BEAUTY 15
SERVICE INDUSTRY. 16
‘‘(a) R
EQUIREMENT OF REPORTING.—Any person 17
who, in the course of a trade or business and for any cal-18
endar year, receives rental payments from two or more 19
individuals providing beauty services (as defined in section 20
45B(e)) aggregating $600 or more each for the lease of 21
space to provide such services to third-party patrons shall 22
make the return described in subsection (b) with respect 23
to each person from whom such rent was so received at 24
such time as the Secretary may by regulations prescribe. 25
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‘‘(b) RETURN.—A return is described in this sub-1
section if such return— 2
‘‘(1) is in such form as the Secretary may pre-3
scribe, and 4
‘‘(2) contains— 5
‘‘(A) the name, address, and TIN of each 6
person from whom a rental payment described 7
in subsection (a) was received during the cal-8
endar year, 9
‘‘(B) the aggregate amount of such pay-10
ments received by such person during such cal-11
endar year and the date and amount of each 12
such payment, and 13
‘‘(C) such other information as the Sec-14
retary may require. 15
‘‘(c) S
TATEMENTTOBEFURNISHED TOPERSONS 16
W
ITHRESPECT TOWHOMINFORMATIONISREQUIRED.— 17
‘‘(1) I
N GENERAL.—Every person required to 18
make a return under subsection (a) shall furnish to 19
each person whose name is required to be set forth 20
in such return a written statement showing— 21
‘‘(A) the name, address, and phone num-22
ber of the information contact of the person re-23
quired to make such a return, and 24
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‘‘(B) the aggregate amount of payments to 1
the person required to be shown on the return. 2
‘‘(2) F
URNISHING OF INFORMATION .—The 3
written statement required under paragraph (1) 4
shall be furnished to the person on or before Janu-5
ary 31 of the year following the calendar year for 6
which the return under subsection (a) is required to 7
be made. 8
‘‘(d) R
EGULATIONS AND GUIDANCE.—The Secretary 9
may prescribe such regulations and other guidance as may 10
be appropriate or necessary to carry out the purpose of 11
this subsection, including rules to prevent duplicative re-12
porting of transactions.’’. 13
(b) C
LERICALAMENDMENT.—The table of sections 14
for subchapter A of chapter 61 of such Code is amended 15
by adding at the end the following new item: 16
‘‘Sec. 6050Z. Returns relating to income from certain rentals of space in the
beauty service industry.’’.
(c) EFFECTIVEDATE.—The amendments made by 17
this section shall apply to payments made after December 18
31, 2025. 19
Æ
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