< Back to H.R. 5917 (109th Congress, 2005–2006)

Text of To amend the Internal Revenue Code of 1986 to provide that tips received for certain services shall not be subject ...

...not be subject to income or employment taxes.

This bill was introduced on July 27, 2006, in a previous session of Congress, but was not enacted. The text of the bill below is as of Jul 27, 2006 (Introduced).

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Source: GPO

I

109th CONGRESS

2d Session

H. R. 5917

IN THE HOUSE OF REPRESENTATIVES

July 27, 2006

(for himself, Mr. Hunter, Mr. McHenry, Mr. Rohrabacher, Mr. Kuhl of New York, Mrs. Blackburn, Mr. Pence, Mr. Simmons, Mr. Gerlach, Mr. Paul, and Ms. Harris) 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 provide that tips received for certain services shall not be subject to income or employment taxes.

1.

Tips received for certain services not subject to income or employment taxes

(a)

In General

Section 102 of the Internal Revenue Code of 1986 (relating to gifts and inheritances) is amended by adding at the end the following new subsection:

(d)

Tips Received for Certain Services

(1)

In general

For purposes of subsection (a), tips received by an individual for qualified services performed by such individual shall be treated as property transferred by gift.

(2)

Qualified services

For purposes of this subsection, the term qualified services means cosmetology, hospitality (including lodging and food and beverage services), recreation, taxi, newspaper deliveries and shoe shine services.

(3)

Annual limit

The amount excluded from gross income for the taxable year by reason of paragraph (1) with respect to each service provider shall not exceed $10,000.

(4)

Employee taxable on at least minimum wage

Paragraph (1) shall not apply to tips received by an employee during any month to the extent that such tips—

(A)

are deemed to have been paid by the employer to the employee pursuant to section 3121(q) (without regard to whether such tips are reported under section 6053), and

(B)

do not exceed the excess of—

(i)

the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (determined without regard to section 3(m) of such Act), over

(ii)

the amount of the wages (excluding tips) paid by the employer to the employee during such month.

(5)

Tips

For purposes of this title, the term tips means a gratuity paid by an individual for services performed for such individual (or for a group which includes such individual) by another individual if such services are not provided pursuant to an employment or similar contractual relationship between such individuals.

.

(b)

Exclusion From Social Security Taxes

(1)

Paragraph (12) of section 3121(a) of such Code is amended to read as follows:

(12)
(A)

tips paid in any medium other than cash;

(B)

cash tips received by an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more and then only to the extent includible in gross income after the application of section 102(d);

.

(2)

Paragraph (10) of section 209(a) of the Social Security Act is amended to read as follows:

(10)
(A)

tips paid in any medium other than cash;

(B)

cash tips received by an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more and then only to the extent includible in gross income after the application of section 102(d) of the Internal Revenue Code of 1986 for such month;

.

(3)

Paragraph (3) of section 3231(e) of such Code is amended to read as follows:

(3)

Solely for purposes of the taxes imposed by section 3201 and other provisions of this chapter insofar as they relate to such taxes, the term compensation also includes cash tips received by an employee in any calendar month in the course of his employment by an employer if the amount of such cash tips is $20 or more and then only to the extent includible in gross income after the application of section 102(d).

.

(c)

Exclusion From Unemployment Compensation Taxes

Subsection (s) of section 3306 of such Code is amended to read as follows:

(s)

Tips Not Treated as Wages

For purposes of this chapter, the term wages shall include tips received in any month only to the extent includible in gross income after the application of section 102(d) for such month.

.

(d)

Exclusion From Wage Withholding

Paragraph (16) of section 3401(a) of such Code is amended to read as follows:

(16)
(A)

as tips in any medium other than cash;

(B)

as cash tips to an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more and then only to the extent includible in gross income after the application of section 102(d);

.

(e)

Conforming Amendment

Sections 32(c)(2)(A)(i) and 220(b)(4)(A) of such Code are each amended by striking tips and inserting tips (to the extent includible in gross income after the application of section 102(d)).

(f)

Effective Date

The amendments made by this section shall apply to tips received after the calendar month which includes the date of the enactment of this Act.