AH&LA Supports Tip Tax Fairness Act

WASHINGTON, D.C.— The American Hotel & Lodging Association (AH&LA) recently announced its support of the Tip Tax Fairness Act, which was introduced last week in the House by Reps. by Wally Herger (R-CA) and John Tanner (D-TN). The proposal would reverse what the AH&LA calls “the adverse effects of the U.S. Supreme Courts June decision in United States v. Fior dItalia.” The Supreme Courts ruling paved the way for the Internal Revenue Service (IRS) to target employers for back FICA (Federal Insurance Contributions Act) taxes without first determining whether employees underreported their tips. Employers, however, must rely on their employees for accurate accounting of this income. In a statement, AH&LA said it “believes that hoteliers should not be subjected to employer-only audits if the IRS suspects some employees are not fully reporting their tip income. The IRS should not make the employer the enforcer of tax laws against their employees.” AH&LA has worked with the IRS on measures to increase tip-reporting compliance, most notably through the Tip Reporting Alternative Commitment (TRAC). The TRAC requires employers to educate employees about tip reporting and tax obligations and to track tips.