Cases: 330 West Hubbard Restaurant Corporation v. United States, 203 F.3d 990 (7th Cir. 2000); Trinet Group, Inc. v. United States, 979 F.3d 1311 (11th Cir. 2020)
Final rules 1
(a) General rule For purposes of section 38, the employer social security credit determined under this section for the taxable year is an amount equal to the excess employer social security tax paid or incurred by the taxpayer during the taxable year.
Cited by 2
(b) Excess employer social security tax For purposes of this section—
(1) In general The term “excess employer social security tax” means any tax paid by an employer under section 3111 with respect to tips received by an employee during any month, to the extent such tips—
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(A) are deemed to have been paid by the employer to the employee pursuant to section 3121(q) (without regard to whether such tips are reported under section 6053), and
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1112(a)(1), inserted “(without regard to whether such tips are reported under section 6053)” after “section 3121(q)”.
(B) exceed the amount by which the wages (excluding tips) paid by the employer to the employee during such month are less than the total amount which would be payable (with respect to such employment) at the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (determined without regard to section 3(m) of such Act, and in the case of food or beverage establishments, as in effect on January 1, 2007).
Amended 2007, 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21, § 70201(e)(2), struck out “as in effect on January 1, 2007, and” before “determined without regard to” and inserted “, and in the case of food or beverage establishments, as in effect on January 1, 2007” after “without regard to section 3(m) of such Act”.
- 2007 Pub. L. 110-28 Pub. L. 110–28 inserted “as in effect on January 1, 2007, and” before “determined without regard to”.
(2) Application only to certain lines of business In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services:
Amended 1996, 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21, § 70201(e)(1), amended par. (2) generally. Prior to amendment, text read as follows: “In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the providing, delivering, or serving of food or beverages for consumption if the tipping of employees delivering or serving food or beverages by customers is customary.”
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1112(b)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “Only tips received at food and beverage establishments taken into account.—In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the provision of food or beverages for consumption on the premises of an establishment with respect to which the tipping of employees serving food or beverages by customers is customary.”
(A) The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary.
(B) The providing of any of the following services to a customer or client if the tipping of employees providing such services is customary:
(i) Barbering and hair care.
(ii) Nail care.
(iii) Esthetics.
(iv) Body and spa treatments.
(c) Denial of double benefit No deduction shall be allowed under this chapter for any amount taken into account in determining the credit under this section.
(d) Election not to claim credit This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.