119-hr2603

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2603 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 2603

 To amend the Internal Revenue Code of 1986 to simplify reporting 
 requirements, promote tax compliance, and reduce tip reporting 
 compliance burdens in the beauty service industry.

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 April 2, 2025

Mr. LaHood (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 reduce tip reporting 
 compliance burdens in the beauty service industry.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``Small Business Tax Fairness and 
Compliance Simplification Act''.

SEC. 2. EXTENSION OF CREDIT FOR PORTION OF EMPLOYER SOCIAL SECURITY 
 TAXES PAID WITH RESPECT TO EMPLOYEE TIPS TO BEAUTY 
 SERVICE ESTABLISHMENTS.

    (a) Extension of Tip Credit to Beauty Service Business.--

    (1) In general.--

Section 45B

    (b) of the Internal Revenue 
 Code of 1986 is amended by striking paragraph

    (2) and inserting 
 the following new paragraphs:
 ``

    (2) Application only to certain lines of business.--In 
 applying paragraph

    (1) there shall be taken into account only 
 tips received from customers or clients in connection with the 
 following services:
 ``
        (A) The providing, delivering, or serving of food 
 or beverages for consumption, if the tipping of 
 employees delivering or serving food or beverages by 
 customers is customary.
 ``
        (B) The providing of beauty services to a 
 customer or client if the tipping of employees 
 providing such services is customary.
 ``

    (3) Limitation on application to beauty services.--
 Paragraph

    (2)
        (B) shall not apply for purposes of determining 
 the credit allowed under subsection

    (a) with respect to any 
 taxpayer for any taxable year unless--
 ``
        (A) the aggregate amount of tips taken into 
 account by such taxpayer as an employer for such 
 taxable year under paragraph

    (1)
        (A) with respect to 
 services described in paragraph

    (2)
        (B) , exceeds
 ``
        (B) 15 percent of the taxpayer's gross receipts 
 with respect to the services described in paragraph

    (2)
        (B) for such taxable year.''.

    (2) Beauty service defined.--

Section 45B of such Code is 
 amended by adding at the end the following new subsection:
 ``

    (e) Beauty Service.--For purposes of this section, the term 
`beauty service' means any of the following:
 ``

    (1) Barbering and hair care.
 ``

    (2) Nail care.
 ``

    (3) Esthetics.
 ``

    (4) Body and spa treatments.''.

    (b) Credit Determined With Respect to Minimum Wage in Effect.--

Section 45B

    (b)

    (1)
        (B) of the Internal Revenue Code of 1986, is amended--

    (1) by striking ``as in effect on January 1, 2007, and''; 
 and

    (2) by inserting ``, and in the case of food or beverage 
 establishments, as in effect on January 1, 2007'' after 
 ``without regard to 

section 3
            (m) of such Act''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 3. EMPLOYER TIP REPORTING SAFE HARBOR.

    (a) In General.--

Section 3121

    (q) of the Internal Revenue Code of 
1986 is amended--

    (1) by striking so much as precedes ``of this chapter'' and 
 inserting the following:
 ``

    (q) Tips Included for Both Employee and Employer Taxes.--
 ``

    (1) In general.--For purposes''; and

    (2) by adding at the end the following new paragraph:
 ``

    (2) Tip program safe harbor.--In the case of an employer 
 who employs one or more employees who receive tips in the 
 course of such employment which are attributable to the 
 performance of beauty services (as such term is defined in 
 

section 45B) are considered remuneration for such employment 
 under this section, no IRS tip examination with respect to such 
 employer shall be initiated (except in the case of a tip 
 examination of a current or former employee) if the employer--
 ``
        (A) establishes an educational program regarding 
 applicable laws relating to proper reporting of tips 
 received by employees for--
 ``
            (i) new employees, which shall include 
 both verbal explanation and written materials, 
 and
 ``
            (ii) existing employees, which shall be 
 conducted quarterly,
 ``
        (B) establishes procedures for tipped employees 
 to provide monthly reporting of cash and charged 
 services and related tip income of at least $20 under 
 

section 6053

    (a) ,
 ``
            (C) complies with all applicable Federal tax law 
 requirements applicable to employers for purposes of 
 filing returns, and collection and payment of taxes 
 imposed, with respect to tip income received by 
 employees, and
 ``
            (D) maintains employee records related to--
 ``
            (i) contact information for such 
 employees, and
 ``
            (ii) gross receipts from any services 
 subject to tipping, and charge receipts for 
 such services, for a period of not less than 4 
 calendar years after the calendar year to which 
 the records relate.''.

    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 4. INFORMATION REPORTING OF INCOME FROM SPACE RENTALS IN THE 
 BEAUTY SERVICE INDUSTRY.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``

SEC. 6050Z. RETURNS RELATING TO INCOME FROM CERTAIN RENTALS OF SPACE 
 IN THE BEAUTY SERVICE INDUSTRY.

 ``

    (a) Requirement of Reporting.--Any person who, in the course of a 
trade or business and for any calendar year, receives rental payments 
from two or more individuals providing beauty services (as defined in 

section 45B

    (e) ) aggregating $600 or more each for the lease of space to 
provide such services to third-party patrons shall make the return 
described in subsection

    (b) with respect to each person from whom such 
rent was so received at such time as the Secretary may by regulations 
prescribe.
 ``

    (b) Return.--A return is described in this subsection if such 
return--
 ``

    (1) is in such form as the Secretary may prescribe, and
 ``

    (2) contains--
 ``
        (A) the name, address, and TIN of each person 
 from whom a rental payment described in subsection

    (a) was received during the calendar year,
 ``
        (B) the aggregate amount of such payments 
 received by such person during such calendar year and 
 the date and amount of each such payment, and
 ``
            (C) such other information as the Secretary may 
 require.
 ``
            (c) Statement To Be Furnished to Persons With Respect to Whom 
Information Is Required.--
 ``

    (1) In general.--Every person required to make a return 
 under subsection

    (a) shall furnish to each person whose name is 
 required to be set forth in such return a written statement 
 showing--
 ``
        (A) the name, address, and phone number of the 
 information contact of the person required to make such 
 a return, and
 ``
        (B) the aggregate amount of payments to the 
 person required to be shown on the return.
 ``

    (2) Furnishing of information.--The written statement 
 required under paragraph

    (1) shall be furnished to the person 
 on or before January 31 of the year following the calendar year 
 for which the return under subsection

    (a) is required to be 
 made.
 ``
            (d) Regulations and Guidance.--The Secretary may prescribe such 
regulations and other guidance as may be appropriate or necessary to 
carry out the purpose of this subsection, including rules to prevent 
duplicative reporting of transactions.''.

    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 61 of such Code is amended by adding at the end the following 
new item:

``

Sec. 6050Z. Returns relating to income from certain rentals of space 
 in the beauty service industry.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to payments made after December 31, 2025.
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