---
kind: "section"
citation: "26 U.S.C. § 7705"
title: "26"
title_heading: "Internal Revenue Code"
number: "7705"
heading: "Certified professional employer organizations"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/7705"
units:
  - "Subtitle F — Procedure and Administration"
  - "Chapter 79 — Definitions"
---

# §7705. Certified professional employer organizations

- (a) **In general—** For purposes of this title, the term “certified professional employer organization” means a [person](/usc/26/7701.md?p=a-1) who applies to be treated as a certified professional employer organization for purposes of [section 3511](/usc/26/3511.md) and has been certified by the [Secretary](/usc/26/7701.md?p=a-11-B) as meeting the requirements of [subsection (b)](#b).
- (b) **Certification requirements—** A [person](/usc/26/7701.md?p=a-1) meets the requirements of this subsection if such [person](/usc/26/7701.md?p=a-1)—
  - (1) demonstrates that such [person](/usc/26/7701.md?p=a-1) (and any owner, officer, and other [persons](/usc/26/7701.md?p=a-1) as may be specified in regulations) meets such requirements as the [Secretary](/usc/26/7701.md?p=a-11-B) shall establish, [including](/usc/26/7701.md?p=c) requirements with respect to tax status, background, experience, business location, and annual financial audits,
  - (2) agrees that it will satisfy the bond and independent financial review requirements of [subsection (c)](#c) on an ongoing basis,
  - (3) agrees that it will satisfy such reporting obligations as may be imposed by the [Secretary](/usc/26/7701.md?p=a-11-B),
  - (4) computes its taxable income using an accrual method of accounting unless the [Secretary](/usc/26/7701.md?p=a-11-B) approves another method,
  - (5) agrees to verify on such periodic basis as the [Secretary](/usc/26/7701.md?p=a-11-B) may prescribe that it continues to meet the requirements of this subsection, and
  - (6) agrees to notify the [Secretary](/usc/26/7701.md?p=a-11-B) in writing within such time as the [Secretary](/usc/26/7701.md?p=a-11-B) may prescribe of any change that materially affects the continuing accuracy of any agreement or information that was previously made or provided under this subsection.
- (c) **Bond and independent financial review—**
  - (1) **In general—** An organization meets the requirements of this paragraph if such organization—
    - (A) meets the bond requirements of [paragraph (2)](#c-2), and
    - (B) meets the independent financial review requirements of [paragraph (3)](#c-3).
  - (2) **Bond—**
    - (A) **In general—** A certified professional employer organization meets the requirements of this paragraph if the organization has posted a bond for the payment of taxes under subtitle C (in a form acceptable to the [Secretary](/usc/26/7701.md?p=a-11-B)) that is in an amount at least equal to the amount specified in [subparagraph (B)](#c-2-B).
    - (B) **Amount of bond—** For the period April 1 of any calendar year through March 31 of the following calendar year, the amount of the bond required is equal to the greater of—
      - (i) 5 percent of the organization’s liability under [section 3511](/usc/26/3511.md) for taxes imposed by subtitle C during the preceding calendar year (but not to exceed $1,000,000), or
      - (ii) $50,000.
  - (3) **Independent financial review requirements—** A certified professional employer organization meets the requirements of this paragraph if such organization—
    - (A) has, as of the most recent audit date, caused to be prepared and provided to the [Secretary](/usc/26/7701.md?p=a-11-B) (in such manner as the [Secretary](/usc/26/7701.md?p=a-11-B) may prescribe) an opinion of an independent certified public accountant as to whether the certified professional employer organization’s financial statements are presented fairly in accordance with generally accepted accounting principles, and
    - (B) provides to the [Secretary](/usc/26/7701.md?p=a-11-B) an assertion regarding Federal employment tax payments and an examination level attestation on such assertion from an independent certified public accountant not later than the last day of the second month beginning after the end of each calendar quarter.

    Such assertion shall [state](/usc/26/7701.md?p=a-10) that the organization has withheld and made deposits of all taxes imposed by chapters [21](/usc/26/chstC/ch21.md), [22](/usc/26/chstC/ch22.md), and [24](/usc/26/chstC/ch24.md) in accordance with regulations imposed by the [Secretary](/usc/26/7701.md?p=a-11-B) for such calendar quarter and such examination level attestation shall [state](/usc/26/7701.md?p=a-10) that such assertion is fairly stated, in all material respects.

  - (4) **Controlled group rules—** For purposes of the requirements of paragraphs [(2)](#c-2) and [(3)](#c-3), all certified professional employer organizations that are [members](/usc/26/7701.md?p=j-4) of a controlled group within the meaning of [sections 414(b)](/usc/26/414.md?p=b) and (c) shall be treated as a single organization.
  - (5) **Failure to file assertion and attestation—** If the certified professional employer organization fails to file the assertion and attestation required by [paragraph (3)](#c-3) with respect to any calendar quarter, then the requirements of [paragraph (3)](#c-3) with respect to such failure shall be treated as not satisfied for the period beginning on the due date for such attestation.
  - (6) **Audit date—** For purposes of [paragraph (3)(A)](#c-3-A), the audit date shall be six months after the completion of the organization’s [fiscal year](/usc/26/7701.md?p=a-24).
- (d) **Suspension and revocation authority—** The [Secretary](/usc/26/7701.md?p=a-11-B) may suspend or revoke a certification of any [person](/usc/26/7701.md?p=a-1) under [subsection (b)](#b) for purposes of [section 3511](/usc/26/3511.md) if the [Secretary](/usc/26/7701.md?p=a-11-B) determines that such [person](/usc/26/7701.md?p=a-1) is not satisfying the agreements or requirements of subsections [(b)](#b) or [(c)](#c), or fails to satisfy applicable accounting, reporting, payment, or deposit requirements.
- (e) **Work site employee—** For purposes of this title—
  - (1) **In general—** The term “work site [employee](/usc/26/7701.md?p=a-20)” means, with respect to a certified professional employer organization, an individual who—
    - (A) performs services for a customer pursuant to a [contract](/usc/26/101.md?p=f-3-A) which is between such customer and the certified professional employer organization and which meets the requirements of [paragraph (2)](#e-2), and
    - (B) performs services at a work site meeting the requirements of [paragraph (3)](#e-3).
  - (2) **Service contract requirements—** A [contract](/usc/26/101.md?p=f-3-A) meets the requirements of this paragraph with respect to an individual performing services for a customer if such [contract](/usc/26/101.md?p=f-3-A) is in writing and provides that the certified professional employer organization shall—
    - (A) assume responsibility for payment of [wages](/usc/26/7701.md?p=j-3) to such individual, without regard to the receipt or adequacy of payment from the customer for such services,
    - (B) assume responsibility for reporting, withholding, and paying any applicable taxes under subtitle C, with respect to such individual’s [wages](/usc/26/7701.md?p=j-3), without regard to the receipt or adequacy of payment from the customer for such services,
    - (C) assume responsibility for any [employee](/usc/26/7701.md?p=a-20) benefits which the service [contract](/usc/26/101.md?p=f-3-A) may require the certified professional employer organization to provide, without regard to the receipt or adequacy of payment from the customer for such benefits,
    - (D) assume responsibility for recruiting, hiring, and firing workers in addition to the customer’s responsibility for recruiting, hiring, and firing workers,
    - (E) maintain [employee](/usc/26/7701.md?p=a-20) records relating to such individual, and
    - (F) agree to be treated as a certified professional employer organization for purposes of [section 3511](/usc/26/3511.md) with respect to such individual.
  - (3) **Work site coverage requirement—** The requirements of this paragraph are met with respect to an individual if at least 85 percent of the individuals performing services for the customer at the work site where such individual performs services are subject to 1 or more [contracts](/usc/26/101.md?p=f-3-A) with the certified professional employer organization which meet the requirements of [paragraph (2)](#e-2) (but not taking into account those individuals who are excluded [employees](/usc/26/7701.md?p=a-20) within the meaning of [section 414(q)(5)](/usc/26/414.md?p=q-5)).
- (f) **Public disclosure—** The [Secretary](/usc/26/7701.md?p=a-11-B) shall make available to the public the name and address of—
  - (1) each [person](/usc/26/7701.md?p=a-1) certified as a professional employer organization under [subsection (a)](#a), and
  - (2) each [person](/usc/26/7701.md?p=a-1) whose certification as a professional employer organization is suspended or revoked under [subsection (d)](#d).
- (g) **Determination of employment status—** Except to the extent necessary for purposes of [section 3511](/usc/26/3511.md), nothing in this section shall be construed to affect the determination of who is an [employee](/usc/26/7701.md?p=a-20) or employer for purposes of this title.
- (h) **Regulations—** The [Secretary](/usc/26/7701.md?p=a-11-B) shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

## Source credit

(Added Pub. L. 113–295, div. B, title II, § 206(b), Dec. 19, 2014, 128 Stat. 4067.)

## Notes

### Statutory Notes and Related Subsidiaries

### Effective Date

Section applicable with respect to wages for services performed on or after January 1 of the first calendar year beginning more than 12 months after Dec. 19, 2014, see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title.

### Certified Professional Employer Organization Certification Program

Pub. L. 113–295, div. B, title II, § 206(g)(2), Dec. 19, 2014, 128 Stat. 4071, provided that: “The Secretary of the Treasury shall establish the certification program described in section 7705(b) of the Internal Revenue Code of 1986, as added by subsection (b), not later than 6 months before the effective date determined under paragraph (1) [see section 206(g)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 3302 of this title].”