96-32249. Credit for Employer Social Security Taxes Paid on Employee Tips

[Federal Register Volume 61, Number 246 (Friday, December 20, 1996)]
[Rules and Regulations]
[Pages 67212-67213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32249]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8699]
RIN 1545-AS19


Credit for Employer Social Security Taxes Paid on Employee Tips

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Removal of temporary regulations.

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[[Page 67213]]

SUMMARY: This document removes the temporary regulations pertaining to 
the credit for employer FICA taxes paid with respect to certain tips 
received by employees of food or beverage establishments. The temporary 
regulations were published in the Federal Register on December 23, 
1993. Statutory changes made by the Small Business Job Protection Act 
of 1996 have made these temporary regulations obsolete.

EFFECTIVE DATE: The removal of the temporary regulations is effective 
January 1, 1994.

FOR FURTHER INFORMATION CONTACT: Jean M. Casey at [phone] (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On December 23, 1993, the IRS published temporary regulations (TD 
8503)(58 FR 68033) under section 45B of the Internal Revenue Code of 
1986 (Code). Amendments made by sec. 1112(a) of the Small Business Job 
Protection Act of 1996 (Pub. L. 104-188) render the temporary 
regulations obsolete. Therefore, temporary regulation Sec. 1.45B-1T is 
being removed.
    On December 23, 1993, the IRS also issued a notice of proposed 
rulemaking (EE-71-93)(58 FR 68091) under section 45B of the Code. This 
notice of proposed rulemaking is being withdrawn in a separate 
document.

Explanation of provisions

    Section 45B of the Code describes a business tax credit allowable 
under section 38 for food and beverage establishments. The credit is 
equal to the employer's Federal Insurance Contributions Act (FICA) 
obligation attributable to certain employee tips. The credit is 
reduced, however, if the nontip wages paid to an employee during a 
month are less than the amount that would have been payable to the 
employee at the federal minimum wage rate. The temporary regulations 
provide that this credit is available only for employer FICA taxes paid 
after December 31, 1993, with respect to tips received for services 
performed after December 31, 1993. The temporary regulations also 
provide that the credit applies only to taxes paid on tips that are 
reported to the employer by its employees.
    Section 1112(a) of the Small Business Job Protection Act of 1996 
amended Code section 45B to provide that the credit is available for 
employer FICA taxes paid after December 31, 1993, regardless of when 
the services with respect to which the tips are received were 
performed. Section 1112(a) also provides that the credit is available 
whether or not the tips on which the employer FICA taxes were paid were 
reported to the employer by the employee. These provisions are 
effective as if included in the legislation under which section 45B was 
originally enacted, and thus render the temporary regulations obsolete.

Drafting Information

    The principal author of these regulations is Jean M. Casey of the 
Office of the Associate Chief Counsel (Employee Benefits and Exempt 
Organizations), IRS. However, other personnel from the IRS and Treasury 
Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Penalties, Reporting and recordkeeping requirements.

Removal of Temporary Regulations

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


Sec. 1.45B-1T  [Removed]

    Par. 2. Section 1.45B-1T is removed.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
    Approved: December 11, 1996.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 96-32249 Filed 12-19-96; 8:45 am]
BILLING CODE 4830-01-P