I.R.C. § 7705(a) In General —
For purposes of this title, the term “certified
professional employer organization” means a person who applies
to be treated as a certified professional employer organization for
purposes of section 3511 and has been certified by the Secretary as meeting the requirements of subsection
(b).
I.R.C. § 7705(b) Certification Requirements —
A person meets the requirements of this subsection if such person—
I.R.C. § 7705(b)(1) —
demonstrates that such person (and any owner, officer, and other persons as may be
specified in regulations)
meets such requirements as the Secretary shall establish, including requirements with
respect to tax status, background, experience, business location, and annual financial
audits,
I.R.C. § 7705(b)(2) —
agrees that it will satisfy the bond and independent financial review requirements
of subsection (c) on an ongoing basis,
I.R.C. § 7705(b)(3) —
agrees that it will satisfy such reporting obligations as may be imposed by the Secretary,
I.R.C. § 7705(b)(4) —
computes its taxable income using an accrual method of accounting unless the Secretary
approves another method,
I.R.C. § 7705(b)(5) —
agrees to verify on such periodic basis as the Secretary may prescribe that it continues
to meet the requirements of this subsection, and
I.R.C. § 7705(b)(6) —
agrees to notify the Secretary in writing within such time as the Secretary may prescribe
of any change that materially affects the continuing accuracy of any agreement or
information that was previously made or provided under this subsection.
I.R.C. § 7705(c) Bond And Independent Financial Review
I.R.C. § 7705(c)(1) In General —
An organization meets the requirements of this paragraph if such organization—
I.R.C. § 7705(c)(1)(A) —
meets the bond requirements of paragraph
(2), and
I.R.C. § 7705(c)(1)(B) —
meets the independent financial review requirements of paragraph (3).
I.R.C. § 7705(c)(2) Bond
I.R.C. § 7705(c)(2)(A) In General —
A certified professional employer organization meets the requirements of this paragraph
if the organization has posted a bond for the payment of taxes under subtitle C (in
a form acceptable to the Secretary) that is in an amount at least equal to the amount
specified in subparagraph (B).
I.R.C. § 7705(c)(2)(B) Amount Of Bond —
For the period April 1 of any calendar year through March 31 of the following calendar
year, the amount of the bond required is equal to the greater of—
I.R.C. § 7705(c)(2)(B)(i) —
5 percent of the organization's liability under section 3511 for taxes imposed by subtitle C during the preceding calendar year (but not to exceed
$1,000,000), or
I.R.C. § 7705(c)(2)(B)(ii) —
$50,000.
I.R.C. § 7705(c)(3) Independent Financial Review Requirements —
A certified professional employer organization meets the requirements of this paragraph
if such organization—
I.R.C. § 7705(c)(3)(A) —
has, as of the most recent audit date, caused to be prepared and provided to the Secretary
(in such manner as the Secretary may prescribe) an opinion of an independent certified
public accountant as to whether the certified professional employer organization's
financial statements are presented fairly in accordance with generally accepted accounting
principles, and
I.R.C. § 7705(c)(3)(B) —
provides to the Secretary an assertion regarding Federal employment tax payments and
an examination level attestation on such assertion from an independent certified public
accountant not later than the last day of the second month beginning after the end
of each calendar quarter.
Such assertion shall state that the organization has withheld and made deposits of
all taxes imposed by chapters 21, 22, and 24 in accordance with regulations imposed
by the Secretary for such calendar quarter and such examination level attestation
shall state that such assertion is fairly stated, in all material respects.
I.R.C. § 7705(c)(4) Controlled Group Rules —
For purposes of the requirements of paragraphs (2) and
(3), all certified professional employer organizations that are members of a controlled
group within the meaning of sections 414(b) and (c) shall be treated as a single organization.
I.R.C. § 7705(c)(5) Failure To File Assertion And Attestation —
If the certified professional employer organization fails to file the assertion and
attestation required by paragraph (3) with respect to any calendar quarter, then the
requirements of paragraph
(3) with respect to such failure shall be treated as not satisfied for the period
beginning on the due date for such attestation.
I.R.C. § 7705(c)(6) Audit Date —
For purposes of paragraph (3)(A), the audit date shall be six months after the completion
of the organization's fiscal year.
I.R.C. § 7705(d) Suspension And Revocation Authority —
The Secretary may suspend or revoke a certification of any person under subsection
(b) for purposes of section 3511 if the Secretary determines that such person is not satisfying the agreements or
requirements of subsections (b) or (c), or fails to satisfy applicable accounting,
reporting, payment, or deposit requirements.
I.R.C. § 7705(e) Work Site Employee —
For purposes of this title—
I.R.C. § 7705(e)(1) In General —
The term “work site employee” means, with respect to a certified professional employer
organization, an individual who—
I.R.C. § 7705(e)(1)(A) —
performs services for a customer pursuant to a contract which is between such customer
and the certified professional employer organization and which meets the requirements
of paragraph
(2), and
I.R.C. § 7705(e)(1)(B) —
performs services at a work site meeting the requirements of paragraph (3).
I.R.C. § 7705(e)(2) Service Contract Requirements —
A contract meets the requirements of this paragraph with respect to an individual
performing services for a customer if such contract is in writing and provides that
the certified professional employer organization shall—
I.R.C. § 7705(e)(2)(A) —
assume responsibility for payment of wages to such individual, without regard to the
receipt or adequacy of payment from the customer for such services,
I.R.C. § 7705(e)(2)(B) —
assume responsibility for reporting, withholding, and paying any applicable taxes
under subtitle C, with respect to such individual's wages, without regard to the receipt
or adequacy of payment from the customer for such services,
I.R.C. § 7705(e)(2)(C) —
assume responsibility for any employee benefits which the service contract may require
the certified professional employer organization to provide, without regard to the
receipt or adequacy of payment from the customer for such benefits,
I.R.C. § 7705(e)(2)(D) —
assume responsibility for recruiting, hiring, and firing workers in addition to the
customer's responsibility for recruiting, hiring, and firing workers,
I.R.C. § 7705(e)(2)(E) —
maintain employee records relating to such individual, and
I.R.C. § 7705(e)(2)(F) —
agree to be treated as a certified professional employer organization for purposes
of section 3511 with respect to such individual.
I.R.C. § 7705(e)(3) Work Site Coverage Requirement —
The requirements of this paragraph are met with respect to an individual if at least
85 percent of the individuals performing services for the customer at the work site
where such individual performs services are subject to 1 or more contracts with the
certified professional employer organization which meet the requirements of paragraph
(2)
(but not taking into account those individuals who are excluded employees within the
meaning of section 414(q)(5)).
I.R.C. § 7705(f) Public Disclosure —
The Secretary shall make available to the public the name and address of—
I.R.C. § 7705(f)(1) —
each person certified as a professional employer organization under subsection (a),
and
I.R.C. § 7705(f)(2) —
each person whose certification as a professional employer organization is suspended
or revoked under subsection
(d).
I.R.C. § 7705(g) Determination Of Employment Status —
Except to the extent necessary for purposes of section 3511, nothing in this section shall be construed to affect the determination of who is
an employee or employer for purposes of this title.
I.R.C. § 7705(h) Regulations —
The Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this section.
(Added by Pub. L. 113-295, Div. B, title II, Sec. 206(b), Dec. 19, 2014, 128 Stat. 4010.)
BACKGROUND NOTES
EFFECTIVE DATE
Effective with respect to wages for services performed on or after January 1 of the
first calendar year beginning more than 12 months after the date of the enactment
of this Act [Enacted: Dec. 19, 2014].
Section 206(g)(2) of Pub. L. 113-295, Div. B, provided:
“(2) Certification Program. The Secretary of the Treasury shall establish the certification
program described in section 7705(b) of the Internal Revenue Code of 1986, as added by subsection (b), not later than 6 months before the effective
date determined under paragraph
(1).”
Section 206(h) of Pub. L. 113-295, Div. B, provided:
“(h) No Inference.—Nothing contained in this section or the amendments made by this
section shall be construed to create any inference with respect to the determination
of who is an employee or employer—
“(1) for Federal tax purposes (other than the purposes set forth in the amendments
made by this section), or
“(2) for purposes of any other provision of law.”
