Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

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Mr. GRASSLEY (for himself and Mr. Baucus):

S. 2913. A bill to amend the Internal Revenue Code of 1986 to clarify the employment tax treatment and reporting of wages paid by professional employer organizations; to the Committee on Finance.

Mr. GRASSLEY. Mr. President, today, Senator Baucus and I are introducing legislation that will update and clarify the tax rules for business clients and that use professional employer organizations, PEOs. This legislation will improve the efficiency of small businesses by eliminating any uncertainty about the ability of qualifying PEOs to assume liability for paying wages and collecting and remitting Federal employment taxes.

Business owners are overwhelmed with the challenges of meeting Federal and State employment and tax responsibilities. Many businesses, particularly small to mid-sized businesses are turning to professional employer organizations for assistance with these employment obligations. A PEO works with its business clients to provide comprehensive employment services. The PEO assumes responsibility for the management of human resources, employee benefits, payroll, and workers' compensation, allowing their business clients to focus on their core competencies to maintain and grow their bottom line. In short, this legislation is about improving the efficiency of America's small businesses.

Businesses today need help with the increasingly complex employment related matters. The most important of these matters is the payment of wages and the collection and remitting of employment taxes. Increasingly, businesses are turning to PEOs to assume these responsibilities. Our legislation will eliminate any ambiguity about a PEO's ability to assume employment tax responsibility while providing important safeguards for the PEO's small business clients.

Tbe Small Business Efficiency Act will permit PEOs that are certified by the IRS, CPEO, to collect and remit Federal employment taxes of their business clients' employees. The certification process is voluntary and was designed with significant input from all stakeholders, including the Department of the Treasury and the IRS. To be certified by the IRS, the CPEO would have to meet financial and other standards and maintain ongoing certification by the IRS. The CPEO would be required to assume full and sole responsibility for the collection of Federal employment taxes.

In addition to the many benefits for business clients, the government benefits from improved employment regulatory compliance and tax administration The IRS has stated that CPEOs would facilitate tax administration by reducing the number of returns it processes and by reducing errors in calculating and paying employment taxes. This is a win-win situation. The PEO arrangement not only reduces the governmental burden of collecting employment tax and unemployment compensation obligations, it also assures consistent compliance with complex tax laws and timely and expedited payment of taxes. This is clearly an improvement for PEOs, the business clients of PEOs, and the Federal Government.

The Small Business Efficiency Act will substantially simplify employment tax obligations for businesses that use PEOs. The legislation will provide clarity for PEOs, their business clients, and the IRS regarding the rights of a PEO to assist business client with employment tax responsibilities while significantly improving tax administration. I ask unanimous consent that the text of the bill and a section-by-section description of the bill be printed in the Congressional Record and I look forward to working with my colleagues to address this issue in a timely manner.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

S. 2913

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