AH&LA Supports Tip Tax Fairness Act

Washington, September 24, 2002 - The American Hotel & Lodging Association (AH&LA) applauds Reps. Wally Herger (R-Calif.) and John Tanner (D-Tenn.) on today’s introduction of the Tip Tax Fairness Act. The proposal would reverse the adverse effects of the U.S. Supreme Court’s June decision in United States v. Fior d`Italia.
The Supreme Court’s 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.

AH&LA 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,” said John P. Connors, AH&LA executive vice president for public policy.
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. “This is the type of model the IRS should pursue,” said Connors, “cooperation with employers.”
For more information regarding the Tip Tax Fairness Act, contact John Gay, AH&LA vice president of governmental affairs, at (202) 289-3123 or [email protected].