Section 1 Short title
This Act may be cited as the “Restaurant Service Charge Fairness Act”.
Restaurant Service Charge Fairness Act
A BILL
To amend the Internal Revenue Code of 1986 to allow a credit for a portion of employer social security taxes paid with respect to service charges paid by the employer to an employee in the form of wages, and for other purposes.
Sec. 2 Credit for portion of employer social security taxes paid with respect to service charges
in paragraph (1)—
by striking “with respect to tips received by an employee” and inserting
“(A) tips received by an employee”
by redesignating subparagraphs (A) and (B) as clauses (i) and (ii),
by striking the period at the end and inserting “, or”, and
by adding at the end the following new subparagraph:
“(B) service charges received by an employee during any month, to the extent that such service charges—
“(i) are deemed to have been paid by the employer to the employee in the form of wages, and that such payment is only provided to non-management employees, and
“(ii) exceed the amount by which the wages (excluding payments from service charges) paid by the employer to the employee during such month are less than the total amount which would be payable (with respect to such employment) at the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (determined without regard to section 3(m) of such Act).”
in paragraph (2), by striking “paragraph (1)” and inserting “paragraph (1)(A)”, and
by adding at the end the following new paragraphs:
“(3) Only one category of excess employer social security tax taken into account during the taxable year—In applying paragraph (1), an employer may elect to claim a credit with respect to either tax paid with respect to tips described in subparagraph (A) of such paragraph or tax paid with respect to service charges described in subparagraph (B) of such paragraph, but not both.
“(4) Limitation on service charges taken into account—In applying paragraph (1)(B), there shall be taken into account only so much of the service charges as does not exceed 25 percent of the gross receipts of the employer for the taxable year.
“(5) Non-management employee—For purposes of this section, the term “non-management employee” means any employee who does not qualify for an exemption under section 13 of the Fair Labor Standards Act of 1938 (29 U.S.C. 213).
“(6) Wages—For purposes of this section, the term “wages” has the meaning given such term in section 3121(a).”
Conforming amendments—
Section 3102(c) of such Code is amended—
in the heading, by inserting “or service charges” after “tips”, and
by striking “tips” each place it appears and inserting “tips or service charges”.
Section 6053 of such Code is amended by striking “tips” each place it appears and inserting “tips or service charges”.
Effective date— The amendment made by this section shall apply to taxes paid in taxable years beginning after December 31, 2024.