DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
March 3, 2000
Number: 200017041
Release Date: 4/28/2000
CC:EBEO:Br2
WTA-N-104343-00
UILC: 3401.04-00; 3121.01-00; 3306.02-00
MEMORANDUM FOR THOMAS BURGER, DIRECTOR
OFFICE OF EMPLOYMENT TAX ADMINISTRATION
AND COMPLIANCE
FROM:
Office of the Assistant Chief Counsel
Employee Benefits and Exempt Organizations
CC:EBEO
SUBJECT:
FICA and FUTA Wage Base Refund Claims Filed by
Professional Employer Organizations
You have been contacted by field offices about various Federal Insurance
Contributions Act (“FICA”) and Federal Unemployment Tax Act (“FUTA”) refund
claims that have been filed around the country. You in turn contacted this office for
advice. Because this advice will be distributed to the field offices, it constitutes
conduit Chief Counsel Advice subject to disclosure under section 6110 of the
Internal Revenue Code.
Background
As mentioned above, various refund claims have been filed. The following is
a generic description of facts typical of the refund claims. However, the resolution
of any claim must be based on the facts of the particular case.
Typically, a taxpayer’s business consists of furnishing employees to work in a
client’s business under a contract (“staffing contract”) between the taxpayer and the
client. Taxpayers use a variety of staffing contracts. However, the contract usually
refers to the taxpayer as the employer of the workers and specifies that the
taxpayer reserves the right to direct and control the workers and to hire, fire and
reassign them. Some contracts provide also for the division of the rights and
responsibilities of an employer between the taxpayer and the client. Some state
that the taxpayer and the client shall each be deemed an employer.
The taxpayer treats itself as the common law employer of the workers for
employment tax and employee benefit purposes. When the taxpayer enters into a
staffing contract with a new client, the taxpayer generally does not have a
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WTA-N-104343-00
preexisting employ