Title VII, SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES. (a) General Rule. Chapter 25 (relating to general provisions applicable to employment taxes) is amended by adding at the end thereof the following new section: ``SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOYMENT TAX RECLASSIFICATIONS. ``(a) General Rule. If ``(1) for purposes of employment taxes, the taxpayer treats an individual as not being an employee for any period, ``(2) for such period, the taxpayer meets ``(A) the consistency requirements of subsection (b), ``(B) the return filing requirements of subsection (c), and ``(C) the safe harbor requirement of subsection (d), and ``(3) the Secretary has not notified the taxpayer in writing before the beginning of such period that the Secretary has determined that the taxpayer should treat such individual (or any individual holding a substantially similar position) as an employee, then, for purposes of applying this subtitle for such period, the individual shall be deemed not to be an employee of the taxpayer. ``(b) Consistency Requirements. A taxpayer meets the consistency requirements of this subsection with respect to any individual for any period if the taxpayer treats such individual (and all other individuals holding substantially similar positions) as not being an employee for purposes of the employment taxes for such period and all prior periods. ``(c) Return Filing Requirements. ``(1) In general. The taxpayer meets the return filing requirements of this subsection with respect to any individual for any period if all Federal tax returns (including information returns) required to be filed by the taxpayer for such period with respect to such individual (and all other individuals holding substantially similar positions) are timely filed on a basis consistent with the taxpayer's treatment of such individuals as not being employees. ``(2) Special rules. For purposes of paragraph (1) ``(A) any return filed for which the penalty under section 6721(a) is reduced or waived pursuant to subsection (b) or (c) of section 6721 shall be considered timely filed, and ``(B) a taxpayer shall not be considered as failing to meet the requirements of paragraph (1) solely because the taxpayer failed to timely file accurate information returns in respect of payments to individuals holding substantially similar positions if the taxpayer satisfies the requirements of section 6721(a)(3)(B) for such period. ``(d) Safe Harbors. ``(1) In general. The taxpayer meets the safe harbor requirement of this subsection with respect to any individual for any period if the taxpayer's treatment of such individual as not being an employee for such period was ``(A) in reasonable reliance on a written determination (as defined in section 6110(b)(1)) issued to or in respect of the taxpayer that addressed the employment status of the individual or an individual holding a substantially similar position; ``(B) in reasonable reliance on a concluded Internal Revenue Service audit of the taxpayer ``(i) which was for a period in which the rules for determining employment status were the same as for the period in question, and ``(ii) in which the employment status of the individual or any individual holding a substantially similar position was examined without change to any such individual's status; ``(C) in reasonable reliance on a longstanding recognized practice of a significant segment of the industry in which the individual is engaged; or ``(D) supported by substantial authority. ``For purposes of subparagraph (D), the term `substantial authority' has the same meaning as when used in section 6662(d)(2)(B)(i); except that such term shall not include any private letter ruling issued to a person other than the taxpayer. ``(2) Special rules. ``(A) Subsequent authority. The taxpayer shall not be considered to meet the safe harbor requirement of paragraph (1)(B) with respect to any individual for any period if the treatment of such individual as not being an employee is inconsistent with any regulation, Revenue Ruling, Revenue Procedure, or other authority published by the Secretary before the beginning of such period and after the conclusion of the audit referred to in paragraph (1)(B). ``(B) Termination of industry practice safe harbor. The taxpayer shall not be considered to meet the safe harbor requirement of paragraph (1)(C) with respect to any individual for ``(i) any period beginning after the date on which the Secretary prescribes regulations pursuant to section 3510, or ``(ii) any period if the treatment of such individual as not being an employee is inconsistent with any regulation, Revenue Ruling, Revenue Procedure, or other authority published by the Secretary before the beginning of such period. ``(e) Definitions and Special Rules. For purposes of this section ``(1) Employment tax. The term `employment tax' means any tax imposed by this subtitle. ``(2) Taxpayer. The term `taxpayer' includes any person or entity (including a governmental entity) which is (or would be but for this section) liable for any employment tax. Such term includes any predecessor or successor to the taxpayer. ``(f) Regulations. The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section.'' (b) Rules to Apply for Income Tax Purposes. Part I of subchapter B of chapter 1 is amended by adding at the end thereof the following new section: ``SEC. 69. DETERMINATION OF EMPLOYMENT STATUS. ``For purposes of this subtitle, an individual shall be treated as a self-employed individual with respect to any services performed by such individual for another person if, under the rules of section 3511, such individual is treated as not being an employee of such other person with respect to such services.'' (c) Conforming Amendment. Section 530 of the Revenue Act of 1978 is hereby repealed. (d) Clerical Amendments. (1) The table of sections for chapter 25 is amended by adding at the end thereof the following new item: ``Sec. 3511. Protection against retroactive employment tax reclassifications.'' (2) The table of sections for part I of subchapter B of chapter 1 is amended by adding at the end thereof the following new item: ``Sec. 69. Determination of employment status.'' (e) Effective Date. (1) In general. Except as provided in paragraph (2), the amendments made by this section shall apply to all periods beginning after December 31, 1995. (2) Repeal of limitations on regulations and rulings. The repeal made by subsection (c), insofar as it relates to section 530(b) of the Revenue Act of 1978, shall take effect on the date of the enactment of this Act.