The Marketing Research Association (MRA) has sent a formal request to the Joint Select Committee on Deficit Reduction (also known as the "Super Committee") to protect independent contractors' status and to amend the Telephone Consumer Protection Act (TCPA) to exempt research calls to cell phones.
(1) Protection of independent contractors' status (Section 530)
The President’s deficit reduction proposal includes a proposal to “increase certainty with respect to worker classification” by repealing Section 530 of the Revenue Act of 1978 (“Section 530”). The proposal also would create a statutory program offering eligible taxpayers a waiver of penalties for voluntarily reclassifying independent contractors to employees, which could supplant the existing CSP and VCSP programs. The President’s proposal mistakenly estimates that these changes would result in an $8 billion increase in revenue over ten years.
Specifically, the President's proposal would permit the Internal Revenue Service (IRS) to issue generally applicable guidance about the proper classification of workers, which Section 530 currently prohibits, and to require prospective reclassification of workers who are currently misclassified and whose reclassification is otherwise protected by Section 530. Under the proposed voluntary program for converting independent contractors to employees, tax penalties would be waived for taxpayers with a small number of employees, and a small number of misclassified workers, provided that the taxpayer has consistently filed all Forms 1099 reporting all payments to all misclassified workers and the taxpayer agrees to prospective reclassification of misclassified workers.
Why MRA cares: Independent contractors play an important role in survey and opinion research, whether as field ethnographers, focus group moderators, or general research consultants. More fundamentally, any research participant receiving an incentive is an independent contractor.
Section 530 provides both parties to an independent contractor relationship with absolute certainty that such status will be respected by the Internal Revenue Service (IRS). As long as the income paid an individual is reported on Forms 1099-MISC, the federal government shouldn’t care whether an individual performs services as an employee or independent contractor. The FICA/SECA tax treatment of each is now substantially the same and their respective tax-compliance rates are more or less the same.
The certainty that Section 530 provides enables companies and self-employed service providers – the quintessential small business persons – to enter into business relationships that they know will be respected for federal employment-tax purposes. A certain and predictable regulatory environment for independent contractors inures to the benefit of independent contractors, the companies that purchase their services and our nation’s economy.
Tax impact overstated: The President’s proposal unreasonably estimates that this repeal would reduce the deficit by $8 billion over 10 years. Section 530 has rigorous eligibility requirements that are not easily satisfied. Rather than providing a loophole, Section 530 actually enhances tax compliance by demanding tax reporting compliance as a condition of eligibility. IRS data show a 97% compliance rate for recipients of Forms 1099, versus 99% for those of Forms W-2 and most of the “tax gap” for the self-employed comes from the unreported cash economy. There is no rational basis for the President’s $8 billion figure. In fact, repealing Section 530 would likely lead to an increase in unreported and untaxed income and a significant decrease in reportable, taxable income.
(2) The Telephone Consumer Protection Act (TCPA)
The President’s deficit reduction proposal also includes an amendment to the Telephone Consumer Protection Act (TCPA) as part of a broader attempt to collect debts owed to the federal government. It would exempt government debt collection calls from the TCPA requirement of express prior consent for using any form of autodialer to call a cell phone: “Allow agencies to contact delinquent debtors via their cellular phones. The Administration also proposes to amend the Communications Act of 1934 to facilitate collection of debts owed to or guaranteed by the Federal Government, by facilitating contact of delinquent debtors who are most readily reached on their cell phones. This provision is expected to provide substantial increases in collections, particularly as an increasing share of households no longer have landlines and rely instead on cell phones.”
The proposal does not include an estimate of how much revenue the President expects to reap from such a change. However, MRA has recommended a broader TCPA amendment that could substantially reduce the cost of survey and opinion research, including research conducted or commissioned by the federal government: exempting calls for bona fide survey and opinion research purposes from the TCPA autodialer/cell phone restrictions.
MRA has been discussing these issues with staff for members of the "Super Committee" and other legislators. We will continue to advocate for the interests of the survey and opinion research profession as the deficit reduction process moves forward.