26 U.S.C. § 7705 — Certified professional employer organiza-

Page 4041 TITLE 26—INTERNAL REVENUE CODE § 7705 1998—Subsec. (g)(3)(C). Pub. L. 105–206 inserted at end ‘‘and shall be paid by the partnership. Section 6655 shall be applied to such partnership with respect to such tax in the same manner as if the partnership were a corporation, such tax were imposed by section 11, and references in such section to taxable income were ref- erences to the gross income referred to in subparagraph (A)’’. 1997—Subsec. (g). Pub. L. 105–34 added subsec. (g). 1988—Subsec. (c)(1). Pub. L. 100–647, § 2004(f)(3), in- serted at end ‘‘For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly trad- ed partnership.’’ Subsec. (d)(1). Pub. L. 100–647, § 2004(f)(4), inserted at end ‘‘For purposes of subparagraph (E), the term ‘min- eral or natural resource’ means any product of a char- acter with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).’’ Subsec. (d)(3). Pub. L. 100–647, § 2004(f)(5), amended par. (3) generally. Prior to amendment, par. (3) read as follows: ‘‘The term ‘real property rent’ means amounts which would qualify as rent from real property under section 856(d) if such section were applied without re- gard to paragraph (2)(C) thereof (relating to inde- pendent contractor requirements).’’ Subsec. (e)(4). Pub. L. 100–647, § 2004(f)(1), inserted ‘‘or to pay such amounts’’ before ‘‘as may be required’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–343, div. B, title I, § 116(b), Oct. 3, 2008, 122 Stat. 3831, provided that: ‘‘The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.’’ Pub. L. 110–343, div. B, title II, § 208(b), Oct. 3, 2008, 122 Stat. 3840, provided that: ‘‘The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.’’ EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 331(h) of Pub. L. 108–357, set out as a note under section 469 of this title. EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106–170 applicable to any in- strument held, acquired, or entered into, any trans- action entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106–170, set out as a note under section 170 of this title. EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–206, title VI, § 6009(b)(2), July 22, 1998, 112 Stat. 812, provided that: ‘‘The second sentence of sec- tion 7704(g)(3)(C) of the 1986 Code (as added by para- graph (1)) shall apply to taxable years beginning after the date of the enactment of this Act [July 22, 1998].’’ EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title IX, § 964(b), Aug. 5, 1997, 111 Stat. 893, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1997.’’ EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title. EFFECTIVE DATE Pub. L. 100–203, title X, § 10211(c), Dec. 22, 1987, 101 Stat. 1330–405, as amended by Pub. L. 100–647, title II, § 2004(f)(2), Nov. 10, 1988, 102 Stat. 3602, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [enacting this section] shall apply— ‘‘(A) except as provided in subparagraph (B), to tax- able years beginning after December 31, 1987, or ‘‘(B) in the case of an existing partnership, to tax- able years beginning after December 31, 1997. ‘‘(2) EXISTING PARTNERSHIP.—For purposes of this sub- section— ‘‘(A) IN GENERAL.—The term ‘existing partnership’ means any partnership if— ‘‘(i) such partnership was a publicly traded part- nership on December 17, 1987, ‘‘(ii) a registration statement indicating that such partnership was to be a publicly traded part- nership was filed with the Securities and Exchange Commission with respect to such partnership on or before such date, or ‘‘(iii) with respect to such partnership, an appli- cation was filed with a State regulatory commis- sion on or before such date seeking permission to restructure a portion of a corporation as a publicly traded partnership. ‘‘(B) SPECIAL RULE WHERE SUBSTANTIAL NEW LINE OF BUSINESS ADDED AFTER DECEMBER 17, 1987.—A partner- ship which, but for this subparagraph, would be treat- ed as an existing partnership shall cease to be treated as an existing partnership as of the 1st day after De- cember 17, 1987, on which there has been an addition of a substantial new line of business with respect to such partnership. ‘‘(C) COORDINATION WITH PASSIVE-TYPE INCOME RE- QUIREMENTS.—In the case of an existing partnership, paragraph (1) of section 7704(c) of the Internal Rev- enue Code of 1986 (as added by this section) shall be applied by substituting for ‘December 31, 1987’ the earlier of— ‘‘(i) December 31, 1997, or ‘‘(ii) the day (if any) as of which such partnership ceases to be treated as an existing partnership by reason of subparagraph (B).’’ § 7705. Certified professional employer organiza- tions (a) In general For purposes of this title, the term ‘‘certified professional employer organization’’ means a person who applies to be treated as a certified professional employer organization for purposes of section 3511 and has been certified by the Sec- retary as meeting the requirements of sub- section (b). (b) Certification requirements A person meets the requirements of this sub- section if such person— (1) demonstrates that such person (and any owner, officer, and other persons as may be specified in regulations) meets such require- ments as the Secretary shall establish, includ- ing 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) on an ongoing basis, (3) agrees that it will satisfy such reporting obligations as may be imposed by the Sec- retary, (4) computes its taxable income using an ac- crual method of accounting unless the Sec- retary approves another method, Page 4042 TITLE 26—INTERNAL REVENUE CODE § 7705 (5) agrees to verify on such periodic basis as the Secretary may prescribe that it continues to meet the requirements of this subsection, and (6) agrees to notify the Secretary in writing within such time as the Secretary may pre- scribe of any change that materially affects the continuing accuracy of any agreement or information that was previously made or pro- vided 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 para- graph (2), and (B) meets the independent financial review requirements of paragraph (3). (2) Bond (A) In general A certified professional employer organiza- tion meets the requirements of this para- graph if the organization has posted a bond for the payment of taxes under subtitle C (in a form acceptable to the Secretary) that is in an amount at least equal to the amount specified in subparagraph (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 liabil- ity under section 3511 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 organiza- tion 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 (in such manner as the Secretary may prescribe) an opinion of an independent certified public accountant as to whether the certified professional employer organiza- tion’s financial statements are presented fairly in accordance with generally accepted accounting principles, and (B) provides to the Secretary an assertion regarding Federal employment tax pay- ments and an examination level attestation on such assertion from an independent cer- tified public accountant not later than the last day of the second month beginning after the end of each calendar quarter. Such assertion shall state that the organiza- tion has withheld and made deposits of all taxes imposed by chapters 21, 22, and 24 in ac- cordance with regulations imposed by the Sec- retary for such calendar quarter and such ex- amination level attestation shall state that such assertion is fairly stated, in all material respects. (4) Controlled group rules For purposes of the requirements of para- graphs (2) and (3), all certified professional em- ployer organizations that are members of a controlled group within the meaning of sec- tions 414(b) and (c) shall be treated as a single organization. (5) Failure to file assertion and attestation If the certified professional employer organi- zation fails to file the assertion and attesta- tion required by paragraph (3) with respect to any calendar quarter, then the requirements of paragraph (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), the audit date shall be six months after the completion of the organization’s fiscal year. (d) Suspension and revocation authority The Secretary may suspend or revoke a cer- tification of any person under subsection (b) for purposes of section 3511 if the Secretary deter- mines that such person is not satisfying the agreements or requirements of subsections (b) or (c), or fails to satisfy applicable accounting, re- porting, payment, or deposit requirements. (e) Work site employee For purposes of this title— (1) In general The term ‘‘work site employee’’ means, with respect to a certified professional employer or- ganization, an individual who— (A) performs services for a customer pur- suant to a contract which is between such customer and the certified professional em- ployer organization and which meets the re- quirements of paragraph (2), and (B) performs services at a work site meet- ing the requirements of paragraph (3). (2) Service contract requirements A contract meets the requirements of this paragraph with respect to an individual per- forming services for a customer if such con- tract is in writing and provides that the cer- tified professional employer organization shall— (A) assume responsibility for payment of wages 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, without regard to the re- ceipt or adequacy of payment from the cus- tomer for such services, (C) assume responsibility for any employee benefits which the service contract may re- quire the certified professional employer or- ganization 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, hir- ing, and firing workers, (E) maintain employee records relating to such individual, and (F) agree to be treated as a certified pro- fessional employer organization for purposes Page 4043 TITLE 26—INTERNAL REVENUE CODE § 7801 1 Section numbers editorially supplied. of section 3511 with respect to such indi- vidual. (3) Work site coverage requirement The requirements of this paragraph are met with respect to an individual if at least 85 per- cent of the individuals performing services for the customer at the work site where such indi- vidual performs services are subject to 1 or more contracts with the certified professional employer organization which meet the re- quirements of paragraph (2) (but not taking into account those individuals who are ex- cluded employees within the meaning of sec- tion 414(q)(5)). (f) Public disclosure The Secretary shall make available to the public the name and address of— (1) each person certified as a professional employer organization under subsection (a), and (2) each person whose certification as a pro- fessional employer organization is suspended or revoked under subsection (d). (g) Determination of employment status Except to the extent necessary for purposes of section 3511, nothing in this section shall be con- strued to affect the determination of who is an employee or employer for purposes of this title. (h) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section. (Added Pub. L. 113–295, div. B, title II, § 206(b), Dec. 19, 2014, 128 Stat. 4067.) 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 Ef- fective 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 de- scribed 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].’’ CHAPTER 80—GENERAL RULES Subchapter Sec.1 A. Application of internal revenue laws .... 7801 B. Effective date and related provisions .... 7851 C. Provisions affecting more than one sub- title .................................................... 7871 Subchapter A—Application of Internal Revenue Laws Sec. 7801. Authority of Department of the Treasury. Sec. 7802. Internal Revenue Service Oversight Board. 7803. Commissioner of Internal Revenue; other offi- cials. 7804. Other personnel. 7805. Rules and regulations. 7806. Construction of title. 7807. Rules in effect upon enactment of this title. 7808. Depositaries for collections. 7809. Deposit of collections. 7810. Revolving fund for redemption of real prop- erty. 7811. Taxpayer Assistance Orders. 7812. Streamlined critical pay authority for infor- mation technology positions. Editorial Notes AMENDMENTS 2019—Pub. L. 116–25, title II, § 2103(b), July 1, 2019, 133 Stat. 1011, added item 7812. 1998—Pub. L. 105–206, title I, §§ 1101(c)(2), 1102(e)(1), 1104(b)(2), July 22, 1998, 112 Stat. 697, 704, 710, added items 7802 to 7804 and struck out former items 7802 ‘‘Commissioner of Internal Revenue; Assistant Com- missioners; Taxpayer Advocate’’, 7803 ‘‘Other per- sonnel’’, and 7804 ‘‘Effect of reorganization plans’’. 1996—Pub. L. 104–168, title I, § 101(b)(3), July 30, 1996, 110 Stat. 1456, added item 7802 and struck out former item 7802 ‘‘Commissioner of Internal Revenue; Assist- ant Commissioner (Employee Plans and Exempt Orga- nizations)’’. 1988—Pub. L. 100–647, title VI, § 6230(b), Nov. 10, 1988, 102 Stat. 3734, added item 7811. 1983—Pub. L. 97–473, title II, § 202(c), Jan. 14, 1983, 96 Stat. 2610, added item for subchapter C. 1974—Pub. L. 93–406, title II, § 1051(c), Sept. 2, 1974, 88 Stat. 951, substituted ‘‘Commissioner of Internal Rev- enue; Assistant Commissioner (Employee Plans and Ex- empt Organizations)’’ for ‘‘Commissioner of Internal Revenue’’ in item 7802. 1966—Pub. L. 89–719, title I, § 112(c), Nov. 2, 1966, 80 Stat. 1146, added item 7810. § 7801. Authority of Department of the Treasury (a) Powers and duties of Secretary (1) In general Except as otherwise expressly provided by law, the administration and enforcement of this title shall be performed by or under the supervision of the Secretary of the Treasury. (2) Administration and enforcement of certain provisions by Attorney General (A) In general The administration and enforcement of the following provisions of this title shall be performed by or under the supervision of the Attorney General; and the term ‘‘Secretary’’ or ‘‘Secretary of the Treasury’’ shall, when applied to those provisions, mean the Attor- ney General; and the term ‘‘internal revenue officer’’ shall, when applied to those provi- sions, mean any officer of the Bureau of Al- cohol, Tobacco, Firearms, and Explosives so designated by the Attorney General: (i) Chapter 53. (ii) Chapters 61 through 80, to the extent such chapters relate to the enforcement and administration of the provisions re- ferred to in clause (i). (B) Use of existing rulings and interpreta- tions Nothing in the Homeland Security Act of 2002 alters or repeals the rulings and inter-