A Day on Capitol Hill for The Alliance for Tax Equity

Day one of the second Washington D.C. fly-in Lobby Day of the 118^th Congress with the Alliance for Tax Equity in support of expanding the 45B FICA Tax Credit on tips for the professional beauty industry was a success.

Together small business owners Cindy Feldman (MD), Lisa Lane (MD), Jeff Burroughs (MD, DE), Debra Sawyer (FL, VA), Hannah Milojevich (NC), Jesse Keyser (MO, IL, MI, KY), Paola Hinton (IL), Katie Trent (WA), Frank Zona and Monica McAllister (MA), along with Myra Reddy and Kati Rapoza (Professional Beauty Association), Gordon Logan (Sport Clips), Mallika Vastare (Personal Care Products Council) and the International Franchise Association visited the offices of their Members of Congress to share their personal story. Each beauty advocate participating in meetings expressed how they would reinvest the credit back into their business and how the funds would benefit the hardworking licensed professionals they employ.

Still recovering in a post COVID economy, salon and barbershop owners have never been reimbursed for the costs associated with PPE requirements and establishment modifications just to open in a limited capacity while trying to stay in business.

In addition to COVID setbacks and ongoing labor shortfalls, employers in the beauty industry are reckoning with the massive additional support in IRS funding. More compliance issues are looming and so far, the federal government has not offered tools or support. H.R.45 and S.45 would allow beauty industry employers access to the existing FICA tax credit on tips which the restaurant industry has benefitted from for the past thirty years.

After taxes are paid on all reportable income, restaurant owners are able to submit a form along with their traditional tax filings allowing for a dollar-for-dollar credit on the employer portion of FICA taxes on tips. In 1993, Congress recognized employers should not be held liable for taxes on customer-paid tips because that income is not paid by the employer nor does the employer benefit from keeping any portion of the tip. Beyond providing the ability to invest back into the hardworking individuals who salon owners employ, this credit provides a tool to help our small business owners be compliant with tip income without the enormous financial burden that doing so currently presents. As the second-highest tipped industry, we need access to this credit we were left out of when it was created.

Each advocate participated in a full day of back-to-back meetings, asking Members of Congress to show their support for small beauty and barber businesses employers in their communities. Recognizing the importance of the beauty industry, the employment opportunities barber shops, salons, and spas provide throughout the country, our group’s ask was for every office that was visited to co-sponsor our bills.

The underreporting of tip income has caused issues for the beauty industry, reflecting poorly in federally reported data regarding average earnings. Our industry is vibrant and growing and it is important to be able to both illustrate that and continue to support its trajectory.

Put simply, the beauty industry has waited years to have access to an existing credit that will help employers keep money in their business. The beauty industry should have the opportunity to claim this credit which will create tax parity, shrink the tip reporting gap, and increase overall income reporting.

During the past two Congressional sessions the FICA tax credit on tips legislation was included in legislative packages put together by Congress but unfortunately did not make it through to passage. This Congress the goal is to drastically increase the cosponsors on the bills, H.R. 45 and S. 45 which will increase the relevance and importance of this legislation. Our industry is immensely thankful to our sponsors, Congressman Darin LaHood, Congresswoman Suzan DelBene, Senator Ben Cardin, and Senator Tim Scott. We encourage every Member of Congress to show their support for our industry made up of true small businesses, owned in large part by women and minorities.

The grassroots campaign needs the entire industry to work together to encourage their elected officials to sign on to the bill in order to finally gain access to the 45B tax credit on tips. This is a priority for our industry and you can get involved by letting your Member of Congress know it is important to you.

Learn more about the FICA Tax Credit on Tips at https://www.probeauty.org/advocacy/fica

Ask your federal elected officials to support your small business and cosponsor H.R. 45 and S.45, https://p2a.co/Sr0hQJI

Tell us how you are willing to get more involved: https//p2a.co/wTgMmoi