Senate Tax Bill Said to Cover Contractor Classification

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By Chris Opfer and Tyrone Richardson

Senate Republicans want to protect businesses that mistakenly classify workers as independent contractors as part of their upcoming tax bill, sources familiar with the legislation told Bloomberg Law today.

The tax measure, set to be unveiled in the Senate as soon as next week, would offer a safe harbor to businesses that treat certain workers as contractors instead of employees for withholding purposes. Businesses would have to meet certain criteria, like having a job-by-job arrangement that’s not primarily based in their offices and a written contract identifying the worker as an independent contractor, in order to be eligible for the protection.

Federal tax law takes several factors into consideration to determine whether a worker is an employee or a contractor. That includes whether the business controls how the worker performs tasks, who provides the tools and supplies to do the job, and whether the business offers employee benefits.

The measure comes as the growing gig economy has shined a light on tax and labor issues for independent contractors. Those workers aren’t entitled to tax withholdings, but can write off business expenses. Independent contractors are also not protected by wage and hour laws and aren’t covered by workers’ compensation and unemployment insurance programs.

Service providers in a wide range of gig and traditional sectors would be eligible for protection under the bill.

Sen. John Thune (R-S.D.), the Senate Republican Conference Chairman, and Rep. Tom Rice (R-S.C.) earlier this year introduced standalone legislation (H.R. 4165, S. 1549) that would establish the safe harbor.

Uber, Airbnb, TaskRabbit, and Handy are among the online platform companies that have lobbied in favor of the standalone legislation. Hilton Worldwide Holdings Inc. has also urged lawmakers to pass the measure.

Thune’s office didn’t immediately respond to Bloomberg Law’s request for comment.

To contact the reporter on this story: Chris Opfer in New York at copfer@bna.com; Tyrone Richardson in Washington at trichardson@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com;

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