WASHINGTON, May 21, 2015 /PRNewswire/ -- A bill introduced yesterday by Representative Erik Paulsen (R-Minnesota) will have a positive impact on American businesses that rely on independent contractor partnerships to meet customer needs. The bill (H.R.2483) 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.
"Some in Washington want to make it more difficult for businesses to use independent contractors, it's time to tell the employer side of the story," said Paulsen. "That's why I introduced this legislation, which provides clarity and guidance for employers so they know they are properly classifying independent contractors. This certainty will allow businesses in Minnesota and across the country to grow and create a healthier economy."
Members of the customized logistics and delivery industry, which relies heavily on the partnership with independent contractors to respond to fluctuating customer demands, praised Representative Paulsen for his leadership in introducing the bill.
"This bill provides much-needed clarity and guidance for businesses that partner with independent contractors to provide the flexibility of their workforce they need to meet customer needs," says Kirk Godby, president of the Customized Logistics and Delivery Association (CLDA). Over 89 percent of CLDA'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 Godby. "They 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 on independent contractor partnerships 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."
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.2483 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.2483 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 Godby. "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."
About the Customized Logistics and Delivery Association
The Customized Logistics and Delivery Association is an advocate for the profitability and professionalism of companies that keep the global supply chain running. The association opens the doors to business success for delivery companies, logistics providers and the shippers who partner with them. Members handle the expedited shipping needs of large and small shippers across North America. CLDA has been providing business opportunities, professional development, trend spotting and advocacy for all of those involved with time-critical and last-mile deliveries since 1987. For more information see www.theCLDA.com.
SOURCE The Customized Logistics and Delivery Association