text: 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.
target: 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.
feat_title: Independent Contractor Clarification Act of 1999