[4830-01-u]
DEPARTMENT OF THE TREASURY                                  
Internal Revenue Service
26 CFR Part 1
[TD 8699]
RIN  1545-AV06
Credit for Employer Social Security Taxes Paid on Employee Tips
AGENCY:  Internal Revenue Service (IRS), Treasury.
ACTION:  Removal of temporary regulations.
SUMMARY: This document removes the temporary regulations
pertaining to the credit for employer FICA taxes paid with
respect to certain tips received by employees of food or beverage
establishments.  The temporary regulations were published in the
Federal Register on December 23, 1993.  Statutory changes made by
the Small Business Job Protection Act of 1996 have made these
temporary regulations obsolete.    
EFFECTIVE DATE:  The removal of the temporary regulations is
effective January 1, 1994.
FOR FURTHER INFORMATION CONTACT:  Jean M. Casey at (202) 622-6060
(not a toll-free number). 
SUPPLEMENTARY INFORMATION:
Background
     On December 23, 1993, the IRS published temporary
regulations (TD 8503)(58 FR 68033) under section 45B of the
Internal Revenue Code of 1986 (Code).  Amendments made by section
1112(a) of the Small Business Job Protection Act of 1996 (Public
Law 104-188) render the temporary regulations obsolete. 
Therefore, temporary regulation 1.45B-1T is being removed.
     On December 23, 1993, the IRS also issued a notice of
proposed rulemaking (EE-71-93)(58 FR 68091) under section 45B of
the Code.  This notice of proposed rulemaking is being withdrawn
in a separate document.
Explanation of provisions
     Section 45B of the Code describes a business tax credit
allowable under section 38 for food and beverage establishments. 
The credit is equal to the employer's Federal Insurance
Contributions Act (FICA) obligation attributable to certain
employee tips.  The credit is reduced, however, if the nontip
wages paid to an employee during a month are less than the amount
that would have been payable to the employee at the federal
minimum wage rate.  The temporary regulations provide that this
credit is available only for employer FICA taxes paid after
December 31, 1993, with respect to tips received for services
performed after December 31, 1993.  The temporary regulations
also provide that the credit applies only to taxes paid on tips
that are reported to the employer by its employees.  
     Section 1112(a) of the Small Business Job Protection Act of
1996 amended Code section 45B to provide that the credit is
available for employer FICA taxes paid after December 31, 1993,
regardless of when the services with respect to which the tips
are received were performed.  Section 1112(a) also provides that
the credit is available whether or not the tips on which the
employer FICA taxes were paid were reported to the employer by
the employee.  These provisions are effective as if included in
the legislation under which section 45B was originally enacted,
and thus render the temporary regulations obsolete.
Drafting Information
     The principal author of these regulations is Jean M. Casey
of the Office of the Associate Chief Counsel (Employee Benefits
and Exempt Organizations), IRS.  However, other personnel from
the IRS and Treasury Department participated in their
development.
List of Subjects in 26 CFR Part 1 
     Income taxes, Penalties, Reporting and recordkeeping
requirements. 
Removal of Temporary Regulations
PART 1--INCOME TAXES
     Paragraph 1.  The authority citation for part 1 continues to
read in part as follows:
     Authority:  26 U.S.C. 7805 * * * 
1.45B-1T  [Removed]
     Par. 2.  Section 1.45B-1T is removed. 


                         Margaret Milner Richardson
                         Commissioner of Internal Revenue

Approved:  December 11, 1996
          Donald C. Lubick
          Acting Assistant Secretary of the Treasury