The Small Business Efficiency Act and Its Importance to the PEO Industry
On July 8, 2011, Representatives Kevin Brady (R-TX) and Mike Thompson (D-CA) introduced H.R. 2466, The Small Business Efficiency Act of 2011. Senators Charles Grassley (R-IA) and Bill Nelson (D-FL) introduced the Senate companion bill (S. 1908) on November 21, 2011. NAPEO strongly supports these bills. This bipartisan legislation would clarify that the PEO is responsible for remitting federal payroll taxes to the IRS and provide protection to small businesses that use certified PEO’s to remit their federal payroll taxes.
Current tax law is not always clear about how the withholding and remittance of employment taxes applies in the PEO environment. The Small Business Efficiency Act would provide important legal clarity by:
- Giving credit to clients for payroll taxes paid by the client in a mid-year initial engagement of a PEO (i.e., no wage base restart);
- Providing that a client satisfies its federal payroll tax obligation when it remits payment to a PEO; and
- Clarifying that a PEO is not to be treated as a successor employer for the purposes of prior client liabilities.
These protections would only be afforded to a certified PEO (CPEO). The requirements contained in H.R. 2466 and S. 1908 for becoming a CPEO are very similar to requirements already found in many state laws.
To ensure passage of H.R. 2466, NAPEO strongly encourages you to take action on this important industry issue.
- Send a customized letter to your Senators and Member of Congress.
- Download a one-page summary of the tax legislation to leave at Congressional offices.
If you want to review this legislation, download a copy of H.R. 2466. NAPEO has also created a summary of the bill. You can review a section-by-section summary of H.R. 2466 here.
Help Us Pass S. 1908, The Small Business Efficiency Act
On November 21, 2011, Senators Charles Grassley (R-IA) and Bill Nelson (D-FL) introduced S. 1908, the Small Business Efficiency Act. This legislation would:
- Grant legal status to PEOs to collect and remit federal payroll taxes;
- Improve small business compliance with federal payroll tax law;
- Create a voluntary certification process within the IRS for PEOs and a safe harbor for small businesses that use certified PEOs; and
- Provide needed certainty for small business, allowing that sector to better focus on growth and job creation.
NAPEO continues to work to pass this legislation. We have targeted Senate Democrats to cosponsor the Small Business Efficiency Act. NAPEO has taken several steps to achieve this goal, including:
- NAPEO President and CEO Pat Cleary sending a letter to President Obama to include the Small Business Efficiency Act as part of the State of the Union address.
- NAPEO President and CEO Pat Cleary sending a letter to the Senate Democrats asking them to cosponsor S. 1908 and including a copy of the letter to the President.
- Sending a grassroots alert to NAPEO members to target select Senate Democrats to cosponsor S. 1908.
- Sending a letter from the Chairman of the NAPEO Board of Directors, Art Geiger, asking all Senators to cosponsor and support S. 1908.
NAPEO has also created several documents to help you communicate with your Congressman and/or Senators, including:
NAPEO will continue to promote the Small Business Efficiency Act before Congress. If you have any questions about how your company can help, please contact Thom Stohler, Director of Federal Government Affairs, at (703) 739-8167 or firstname.lastname@example.org.