WASHINGTON, Dec. 13, 2012 /PRNewswire-USNewswire/ -- A bill introduced yesterday by Representative Erik Paulsen (R-Minnesota) will have a positive impact on American businesses that rely on independent contractors to meet customer needs. The bill (H.R.6653) is one to amend the Internal Revenue Code of 1986 to provide standards for determining employment status, and for other purposes. It puts forth a two-part test that establishes a formal definition of who is an independent contractor. In addition, it will clarify Safe Harbor provisions of the Tax Code which also helps to define an independent contractor. The measure was referred to the House Committee on Ways & Means.
"This bill provides much-needed clarity and guidance for businesses that rely on independent contractors to provide the flexibility of their workforce they need to meet customer needs," says Rob Johnstone, president of the Messenger Courier Association of America (MCAA). Over 89 percent of MCAA's members said that their ability to utilize independent contractors was important to their business success, in a recent survey conducted by the association.
"Independent contractors are the backbone of our industry, allowing us to be responsive and flexible enough to meet changing customer demands," says Johnstone. "Independent contractors are a key part of this nation's supply chain and our country's ability to remain competitive in today's economy. As the industry that provides on-demand deliveries that respond to time-sensitive needs, we rely heavily on independent contractors to help us fulfill those customer needs. This bill brings clarity to the definition of an independent contractor, enabling all industries that depend on them to remain in compliance and to properly classify them. Before the introduction of this bill, there was no uniform and clear definition of 'employee vs. independent contractor' at the federal level. As a result, there has been a lot of ambiguity about what constitutes an employee and a bona fide independent contractor. This lack of clear and consistent guidance for businesses in making determinations as to whether an individual is an employee or an independent contractor caused much confusion and uncertainty in the business community. In the past, Congress has attempted to deal with this lack of clarity, but it was never codified as part of the Internal Revenue Code. This bill will do just that, bringing clarity and guidance to all of us who are dependent upon independent contractors in our businesses."
The bill provides a new section to the Internal Revenue Code (Section 3511) which will assist businesses in making the proper classification. By adding this section, the goal of H.R.6653 is to assist business with compliance and proper classification of individuals as independent contractors. In 1978, Congress enacted Section 530 of the Revenue Act of 1978 to provide a safe-harbor for businesses with respect to the employment classification of individuals. This came as a result of inconsistent employment tax audits where the definition of "employee" was unclear. Congress affirmatively acted to make the Section 530 Safe Harbor permanent in 1982. However, this issue wasn't included in tax reform in 1986 and therefore was not codified as part of the Internal Revenue Code.
H.R.6653 has two basic goals. First, it puts Safe Harbor provisions on a firmer ground by placing it in the Internal Revenue Code. Second, it provides additional clarity to businesses about what constitutes an independent contractor with two new sections in the Internal Revenue Code – 3511 and 3512. Section 3511 includes the Safe Harbor. Section 3512 establishes a two-part test to determine whether a service provider and service recipient are not employee and employer respectively. The two criteria used to determine employment status are: 1. the individual either has investment in equipment or is subject to income fluctuation; and 2. the individual has control of time worked and performance of services.
"We applaud Congressman Paulsen for his introduction of this bill," adds Johnstone. "It provides the kind of pro-business, pro-growth effort that helps all of us in the private sector continue contributing to the nation's economy."
MCAA is the voice of the expedited, same-day delivery industry. Its members keep the wheels of commerce rolling in North America. MCAA is the largest trade association in the expedited delivery industry providing time-critical deliveries to both expediters and shippers. Celebrating its 25th year in 2012, the MCAA promotes and advances the professionalism of the expedited, same-day delivery industry through education and advocacy. For more information see www.mcaa.com.
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SOURCE Messenger Courier Association of America