Section 1 Short title
This Act may be cited as the “Tipped Income Protection and Support Act” or “TIPS Act”.
Tipped Income Protection and Support Act
A BILL
To amend the Fair Labor Standards Act of 1938 to eliminate the separate minimum wage for tipped employees, and for other purposes.
Sec. 2 Repeal of separate minimum wage for tipped employees
Minimum wage for tipped employees— Section 3(m)(2)(A) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A)) is amended to read as follows:
“(A) The wage required to be paid to a tipped employee shall be the wage set forth in section 6(a)(1). All tips received by such employee shall be retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”
Penalties— Section 16 of the Fair Labor Standards Act of 1938 (29 U.S.C. 216), as amended by this Act, is further amended—
in subsection (b), by striking “the sum of any tip credit taken by the employer and all such tips unlawfully kept by the employer” and inserting “the sum of all such tips unlawfully used or kept by the employer”; and
in subsection (c), by striking “the sum of any tip credit taken by the employer and all such tips unlawfully kept by the employer” and inserting “the sum of all such tips unlawfully used or kept by the employer”.
Sec. 3 Deduction for cash tips
In general—
Deduction allowed— Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:
“224. Cash tips
“(a) In general—There shall be allowed as a deduction an amount equal to the amount of qualified tips received during the taxable year that are included on statements furnished to the employer pursuant to section 6053(a).
“(b) Limitation—No deduction shall be allowed under subsection (a) to any individual for any taxable year if the adjusted gross income of such individual for such taxable year exceeds $112,500.
“(c) Qualified tips—For purposes of this section, the term “qualified tips” means a tip received by an individual—
“(1) from an unrelated party,
“(2) who does not have an ownership stake in the business which employs them in the job in for which such individual is receiving a tip, and
“(3) in the course of such individual’s employment in an occupation which traditionally and customarily received tips, including—
“(A) cosmetology,
“(B) hospitality,
“(C) food and beverage service,
“(D) parking attendants, and
“(E) custodial service.”
Conforming amendment— The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as relating to section 225 and by inserting after the item relating to section 223 the following new item:
Deduction allowed to non-Itemizers— Section 63(b) of the Internal Revenue Code of 1986 is amended by striking “and” at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting “and”, and by adding at the end the following new paragraph:
“(5) the deduction provided in section 224.”
Non-Application of certain limitations for itemizers—
Deduction not treated as a miscellaneous itemized deduction— Section 67(b) of the Internal Revenue Code of 1986 is amended by striking “and” at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting “, and”, and by adding at the end the following new paragraph:
“(13) the deduction under section 224 (relating to cash tips).”
Deduction not taken into account under overall limitation— Section 68(c) of the Internal Revenue Code of 1986 is amended by striking “and” at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting “, and”, and by adding at the end the following new paragraph:
“(4) the deduction under section 224 (relating to cash tips).”
Withholding— The Secretary of the Treasury (or the Secretary's delegate) shall modify the tables and procedures prescribed under section 3402(a) of the Internal Revenue Code of 1986 to take into account the deduction allowed under section 224 of such Code (as added by this Act).
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2025.