On the recordJuly 16, 2014
As the Chair knows, I find several of the Federal agencies very frustrating, but among the most frustrating is the Internal Revenue Service. One of the more interesting rulings of the Internal Revenue Service deals with the reclassification of certain gratuities as wages when they were meant to be tips. And having grown up in the restaurant business, I will tell you that there is a tremendous difference--not only to the employer, but to the employee--as to whether a wage is classified as a wage or whether it is classified as a gratuity. I know that firsthand from growing up in a family-run and local restaurant. Revenue rule 2012-18 has forced businesses to change the way that they have traditionally handled consumer checks, and that has resulted in a burdensome and logistical challenge for small and local businesses across the country. Mr. Chairman, for over 50 years, restaurants have had a longstanding practice of treating these automatic gratuities as tips. For example, if you have a large party of 50 people, then you want to make sure that your waiter or waitress is well taken care of. And for a while there it was 15 percent, now it is about 18 percent, that is added on as a gratuity. That gratuity is meant to go to the waiters and waitresses who have helped your party.…
