WASHINGTON, D.C. - 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 constantly changing and demanding customer needs. H.R. 3396 amends the Internal Revenue Code of 1986 to provide standards for determining a worker’s employment status, and for other purposes. It puts forth a two-part test that establishes a formal definition of who is an independent contractor and creates Safe Harbor provisions of the Tax Code which also helps to define the relationship between an independent contractor and the service recipient and/or payor. The bill was referred to the House Committee on Ways & Means.  “Currently, it is difficult and overly complicated for businesses to use independent contractors, which limits companies’ growth and individuals’ work,” said Paulsen. “That’s why I introduced this legislation, which provides clarity and guidance for businesses so they know they are properly classifying independent contractors without fear of IRS penalties. This is another step towards growing and creating a healthier economy in Minnesota and across the country as part of the larger tax reform effort.” Members of the 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 John Benko, 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 Benko. “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 and same-day deliveries that respond to time-sensitive needs, we rely on independent contractor partnerships to help us fulfill those customer needs. This bill brings clarity and transparency 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.3396 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.3396 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.  “We applaud Congressman Paulsen for his introduction of this bill,” adds Benko. “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.”