26 USC 7705 - Certified professional employer organizations

U.S Code last checked for updates: Nov 22, 2024

§ 7705.

Certified professional employer organizations

(a)

In general

(b)

Certification requirements

A person meets the requirements of this subsection if such person—

(1)

demonstrates that such person (and any owner, officer, and other persons as may be specified in regulations) meets such requirements as the Secretary shall establish, including 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 Secretary,

(4)

computes its taxable income using an accrual method of accounting unless the Secretary approves another method,

(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 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), and

(B)

meets the independent financial review requirements of paragraph (3).

(2)

Bond

(A)

In general

(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 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 (in such manner as the Secretary 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 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 that the organization has withheld and made deposits of all taxes imposed by chapters 21, 22, and 24 in accordance with regulations imposed by the Secretary for such calendar quarter and such examination level attestation shall state that such assertion is fairly stated, in all material respects.

(4)

Controlled group rules

(5)

Failure to file assertion and attestation

(6)

Audit date

(d)

Suspension and revocation authority

(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 organization, an individual who—

(A)

performs services for a customer pursuant to a contract which is between such customer and the certified professional employer organization and which meets the requirements of paragraph (2), and

(B)

performs services at a work site meeting the requirements of paragraph (3).

(2)

Service contract requirements

A contract meets the requirements of this paragraph with respect to an individual performing services for a customer if such contract is in writing and provides that the certified 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 receipt or adequacy of payment from the customer for such services,

(C)

assume responsibility for any employee benefits which the service contract 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 records relating to such individual, and

(F)

agree to be treated as a certified professional employer organization for purposes of section 3511 with respect to such individual.

(3)

Work site coverage requirement

(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 professional employer organization is suspended or revoked under subsection (d).

(g)

Determination of employment status

(h)

Regulations

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

cite as: 26 USC 7705