LaHood unveils bipartisan bill to improve tax fairness for beauty service industry

U.S. Rep. Darin LaHood (R-IL) on Jan. 9 proposed a bipartisan bill to expand a federal tax credit to America’s beauty service industry, which includes barbering and hair care, nail care, esthetics, and body and spa treatments.

The Small Business Tax Fairness and Compliance Simplification Act, H.R. 45, which Rep. LaHood sponsored with original cosponsor U.S. Rep. Suzan DelBene (D-WA), would amend the Internal Revenue Code of 1986 to simplify reporting requirements, promote tax compliance, and reduce tip reporting compliance burdens in the beauty service industry, according to the text of the bill.

“I am proud to continue to champion this bill with Congresswoman DelBene, to strengthen small businesses, improve reporting of tip income, and help businesses navigate IRS administrative rules and procedures,” Rep. LaHood said on Wednesday.

Specifically, H.R. 45 would extend the Federal Insurance Contribution Act (FICA) tax tip credit, which is currently available to the food service industry, to employer-based salon and beauty service establishments where tipping is also customary, says a bill summary provided by Rep. LaHood’s office.

“Our bipartisan Small Business Tax Fairness and Compliance Simplification Act will level the playing field and provide direct relief to millions of salon and beauty care professionals who rely on tips,” said Rep. LaHood. 

The FICA tax tip credit acts as a reimbursement for the costs employers incur in accounting for tip income, according to the congressman’s bill summary. 

“Extending this tax relief to the beauty industry would provide parity with other industries, like food service, that already take advantage of this credit,” said Rep. DelBene. “This bipartisan legislation would bring commonsense tax relief to salons and their workers, support women-owned businesses, and expand our middle class.”

Reps. LaHood and DelBene originally introduced the same-named H.R. 821 in February 2021 to expand the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips to include beauty service establishments. Under current law, the credit is limited to tips received for providing, serving, or delivering food or beverages, according to the congressional record bill summary.

The measure had been referred to the U.S. House Ways and Means Committee, where it remained without action.