article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Independent Contractor Clarification Act of 1999''. SEC. 2. DETERMINATION OF EMPLOYEE AND EMPLOYER STATUS. (a) In General.--Subsection (c) of section 7701 of the Internal Revenue Code of 1986 is amended to read as follows: ``(c) Employee and Employer.-- ``(1) In general.--For purposes of this title, except as otherwise expressly provided in this title-- ``(A) an individual (hereinafter in this subsection referred to as the `service provider') performing services for another person (hereinafter in this subsection referred to as the `service recipient') shall be treated as an employee of the service recipient, and ``(B) the service recipient shall be treated as the employer of such service provider, unless the requirements of each of the subparagraphs of paragraph (3) have been satisfied. ``(2) Repeal of common law tests.--The rules of this subsection shall apply in lieu of any common law rules which would otherwise apply. ``(3) Requirements.-- ``(A) Lack of control by service recipient.--The requirements of this subparagraph are met only if the service provider has the right, to the exclusion of the service recipient, to control and direct the manner of, and the means used in, the service provider's performance of services for the service recipient. ``(B) Availability of service to others.--The requirements of this subparagraph are met only if the service provider-- ``(i) makes substantially similar services available to others, and ``(ii) is not precluded by the service recipient from soliciting business opportunities that involve providing substantially similar services for other persons during the period that the service provider is providing services for the service recipient. ``(C) Entrepreneurial risk.--The requirements of this subparagraph are met only if-- ``(i) in the service provider's overall business activities, the service provider has the potential to generate profit and bears risk of loss and the extent to which profit is generated or loss is sustained depends on the service provider's efforts and decisions other than as to the amount of work performed, and ``(ii) in the event the service provider fails to perform the work in accordance with the service recipient's requirements, the service provider is either subject to liability to the service recipient for damages arising from claims sounding in contract or would be subject to such liability but for a waiver by the service recipient. ``(4) Person.--For purposes of this subsection, the term `person' includes any governmental unit (and any agency or instrumentality thereof).'' (b) Repeal of Section 530 of Revenue Act of 1978.--Section 530 of the Revenue Act of 1978 is hereby repealed. (c) Conforming Amendments.-- (1) Paragraph (2) of section 3121(d) of such Code is amended to read as follows: ``(2) any individual who is treated as an employee under section 7701(c); or''. (2) Paragraph (2) of section 210(j) of the Social Security Act is amended to read as follows: ``(2) any individual who is treated as an employee under section 7701(c) of the Internal Revenue Code of 1986; or''. (3) Subsection (a) of section 7701 of such Code is amended by inserting after paragraph (33) the following new paragraph: ``(34) Includes and including.--The terms `includes' and `including' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.'' (d) Effective Date.-- (1) In general.--Except as provided in paragraph (2), the amendments made by this section shall apply to services performed after December 31, 2000. (2) Repeal of limitations on regulations and rulings.--The repeal made by subsection (b), insofar as it relates to section 530(b) of the Revenue Act of 1978, shall take effect on the date of the enactment of this Act; except that regulations and Revenue Rulings permitted to be issued by reason of such repeal may not apply to services performed before January 1, 2001. SEC. 3. LIMITATIONS ON RETROACTIVE EMPLOYMENT TAX RECLASSIFICATIONS. (a) General Rule.--Chapter 25 of the Internal Revenue Code of 1986 (relating to general provisions applicable to employment taxes) is amended by adding at the end the following new section: ``SEC. 3511. LIMITATIONS ON RETROACTIVE EMPLOYMENT TAX RECLASSIFICATIONS. ``(a) General Rule.--If-- ``(1) for purposes of employment taxes, the taxpayer treats an individual as not being an employee for any period after December 31, 2000, and ``(2) for such period, the taxpayer meets-- ``(A) the consistency requirements of subsection (b), ``(B) the return filing requirements of subsection (c), and ``(C) the safe harbor requirement of subsection (d), for purposes of applying this subtitle for such period, the individual shall be deemed not to be an employee of the taxpayer for such period. The preceding sentence shall cease to apply to periods beginning more than 60 days after the date that the Secretary notifies the taxpayer in writing of a final administrative determination that the taxpayer should treat such individual (or any individual holding a substantially similar position) as an employee. ``(b) Consistency Requirements.--A taxpayer meets the consistency requirements of this subsection with respect to any individual for any period if the taxpayer treats such individual (and all other individuals holding substantially similar positions) as not being an employee for purposes of the employment taxes for such period and all prior periods after December 31, 1978. ``(c) Return Filing Requirements.--The taxpayer meets the return filing requirements of this subsection with respect to any individual for any period if all Federal tax returns (including information returns) required to be filed by the taxpayer for such period with respect to such individual are filed on a basis consistent with the taxpayer's treatment of such individual as not being an employee. ``(d) Safe Harbors.-- ``(1) In general.--The taxpayer meets the safe harbor requirement of this subsection with respect to any individual for any period if the taxpayer establishes that its treatment of such individual as not being an employee for such period was-- ``(A) in reasonable reliance on a written determination (as defined in section 6110(b)(1)) issued to the taxpayer that addressed the employment status of the individual or an individual holding a substantially similar position with the taxpayer; ``(B) in reasonable reliance on a concluded Internal Revenue Service audit of the taxpayer in which the employment status of the individual or any individual holding a substantially similar position with the taxpayer was examined and the taxpayer was notified in writing that no change would be made to such individual's employment status; or ``(C) supported by substantial authority. For purposes of subparagraph (C), the term `substantial authority' has the same meaning as when used in section 6662(d)(2)(B)(i); except that such term shall not include (i) any private letter ruling issued to a person other than the taxpayer, and (ii) any authority that does not address the employment status of individuals holding positions substantially similar to that of the individual. ``(2) Special rules.-- ``(A) Application to pre-2001 determinations, etc.--Paragraph (1) shall apply without regard to whether the determination, audit, or the authority referred to therein was before January 1, 2001. ``(B) Subsequent authority.--The taxpayer shall not be considered to meet the safe harbor requirement of paragraph (1) with respect to any individual for any period if the treatment of such individual as not being an employee is inconsistent with any regulation, Revenue Ruling, Revenue Procedure, or other authority-- ``(i) which is published by the Secretary at least 60 days before the beginning of such period and after the date of the determination, the conclusion of the audit, or the substantial authority referred to in paragraph (1), and ``(ii) which applies to the type of services performed by such individual or the industry or business in which such services are performed. ``(3) Transitional rule.--Except as provided in paragraph (2)(B), the taxpayer shall be considered to meet the safe harbor requirement of paragraph (1) with respect to services performed by an individual during 2001 or 2002 if the taxpayer would be treated under section 530 of the Revenue Act of 1978 (as in effect on the day before the date of the enactment of this section) as having a reasonable basis for not treating such individual as an employee. ``(e) Other Special Rules.-- ``(1) Notice.--An officer or employee of the Internal Revenue Service shall, before or at the commencement of any audit inquiry relating to the employment status of one or more individuals who perform services for the taxpayer, provide the taxpayer with a written notice of the provisions of this section. ``(2) Availability of safe harbors.--Nothing in this section shall be construed to provide that this section only applies where the individual involved is otherwise an employee of the taxpayer. ``(f) Definitions and Special Rules.--For purposes of this section-- ``(1) Employment tax.--The term `employment tax' means any tax imposed by this subtitle. ``(2) Employment status.--The term `employment status' means the status of an individual as an employee or as an independent contractor (or other individual who is not an employee). ``(3) Taxpayer.--The term `taxpayer' includes any person or entity (including a governmental entity) which is (or would be but for this section) liable for any employment tax. Such term includes any predecessor or successor to the taxpayer. ``(4) Substantially similar position.--The determination as to whether an individual holds a position substantially similar to a position held by another individual shall include consideration of the relationship between the taxpayer and such individuals. ``(g) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section.'' (b) Clerical Amendment.--The table of sections for chapter 25 of such Code is amended by adding at the end the following new item: ``Sec. 3511. Limitations on retroactive employment tax reclassifications.'' (c) Effective Date.--The amendments made by this section shall apply to all periods beginning after December 31, 2000. SEC. 4. STATUTE OF LIMITATIONS ON ASSESSMENT OF EMPLOYMENT TAXES TO RUN BEGINNING ON DATE CERTAIN INFORMATION RETURNS FILED. (a) In General.--Subsection (b) of section 6501 of the Internal Revenue Code of 1986 (relating to limitations on assessment and collection) is amended by adding at the end the following new paragraph: ``(5) Certain information returns to begin limitation periods on employment taxes.--For purposes of this section, if-- ``(A) a return is filed under section 6041 or 6041A which specifies an amount of payments made to any individual for services performed by such individual, and ``(B) such payments are not taken into account in determining the taxes imposed by chapters 21 and 24, then, notwithstanding the last sentence of subsection (a), such return shall be treated as the return referred to in subsection (a) for purposes of determining the period of limitations with respect to such taxes on such services.'' (b) Effective Date.--The amendment made by this section shall apply to payments made after December 31, 2000.
summary: Sets forth restrictions on retroactive employment tax reclassifications, including safe harbor requirements. Provides that the statute of limitations on assessment of employment taxes shall run beginning on the date certain information returns (specifying payments to an individual for services performed where the payments are not taken into account in determining such taxes) are filed.