| Exhibit
1 |
| Gaming
Industry Tip Compliance Agreement |
| I. PARTIES |
| The parties to this Agreement are
(hereinafter “Employer”) and the Commissioner of the Internal
Revenue Service (hereinafter “Service”; collectively “the
Parties”). This Agreement will establish tip rates for all Participating
Employees of the Employer. This Agreement is pursuant to Revenue Procedure
2007-XX.
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| II. APPENDICES |
| The Parties have agreed to: |
| A. The Occupational Categories,
shifts, outlets, and tip rates for all participating employees of the Employer,
set forth in Appendix A;
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| B. A Narrative Summary of Tip Rate
Calculation Methodology (specific to the Employer), set forth in Appendix
B;
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| C. The Model Gaming Employee Tip
Reporting Agreement, set forth in Appendix C;
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| D. The Model Extension Agreement
set forth in Appendix D;
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| E. The Employer-Computed Tip Reporting
Process Certification Form, set forth in Appendix E (but only if the Employer
uses an Employer-Computed Tip Reporting Process to compute and report the
tips of Participating Employees as described in Section V.J of this Agreement);
and
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| F. The GITCA Contact Listing for
both the Service and the Employer, set forth in Appendix F.
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| III. INTENDED
BENEFICIARIES |
| The Participating Employees of the
Employer are intended beneficiaries of this Agreement.
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| IV. EMPLOYEE
PARTICIPATION |
| A. For purposes of this Agreement,
an “Eligible Employee” means an individual employed by the Employer
who:
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(1) performs a job function in an
Occupational Category described in Appendix A of this Agreement; and
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(2) regularly and routinely receives
tips, directly or indirectly, of at least $20 per month during the course
of the individual’s employment.
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| B. A “Participating Employee”
is an Eligible Employee who:
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(1) filed, if required to do so by
law, federal income tax returns for the three taxable years that precede the
Effective Date of this Agreement or, if the employee has not yet filed, files
these returns prior to signing the Model Gaming Employee Tip Reporting Agreement
provided in Appendix C of this Agreement;
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(2) gives to the Employer a signed
Model Gaming Employee Tip Reporting Agreement;
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(3) either (i) reports and continues
to report tips to the Employer at or above the “tip rates” set
forth in Section VIII of this Agreement, or (ii) works for an Employer that
utilizes an Employer-Computed Tip Reporting Process to compute and report
the tips of Participating Employees for the taxable year as described in Section
V.J of this Agreement, and
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(4) timely files federal income tax
returns that report those tips.
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| C. A Participating Employee who revokes
the election under the Model Gaming Employee Tip Reporting Agreement to participate
in the tip reporting program under this Agreement must begin reporting tips
to the Employer effective on the first day of the next payroll period, as
provided by section 6053 of the Internal Revenue Code and shall be treated
as a Nonparticipating Employee for the entire taxable year in which the revocation
occurred. The Employee may not enter into a new Model Gaming Employee Tip
Reporting Agreement with the Employer until January 1 of the following taxable
year.
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| D. If a Participating Employee reports
tips to his or her Employer in an amount below the tip rate set forth in Section
VIII of this Agreement, the employee will be deemed to have revoked his or
her election under the Model Gaming Employee Tip Reporting Agreement and will
be treated as specified in paragraph C of this section.
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| E. An Eligible Employee who has
filed federal income tax returns for the three taxable years that precede
the Effective Date of this Agreement but has not fully paid the tax liability
reported on the returns, or has additional tax liability due to, for example,
a completed examination of the returns or the filing of amended returns, may
participate in this program. To participate, however, the employee must contact
the local office of the Service within the later of 60 days of electing to
become a Participating Employee under this Agreement or 60 days of commencing
employment to resolve the tax liability.
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| F. For purposes of this Agreement,
a “Nonparticipating Employee” is any Eligible Employee who does
not meet the definition of a Participating Employee.
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| G. An employee may report tips on
the employee’s federal income tax return below the tip rates if the
employee can substantiate, with adequate books and records, that the employee
earned less tip income than would be reflected by applying the tip rates.
As indicated in Section IV.D., this employee would be considered a Nonparticipating
Employee.
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| V. EMPLOYER
PROGRAM |
| A. The Employer agrees to encourage
all of its Eligible Employees to become Participating Employees and to sign
the Model Gaming Employee Tip Reporting Agreement, attached as Appendix C.
The Employer agrees to keep these agreements for at least the period of limitation
on assessment of employment tax for the years in which this Agreement is in
effect and to make the agreements available to the Service upon request.
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| B. The Employer shall withhold and
pay tax based upon tips reported, as required by law.
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| C. The Employer shall include all
reported tips on Forms W-2.
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| D. The Employer acknowledges that
the Service has authority, including the issuance and enforcement of summonses
pursuant to sections 7602, 7604, and 7609 of the Code, to secure the information
necessary for the Service to develop the tip rates of Nonparticipating Employees.
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| E. The Employer shall maintain the
following records, to be made available to the Service upon request:
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(1) Employee Records. For each Eligible
Employee, the Employer will maintain a record of the employee’s name
and social security number; the date on which the employee was hired by the
Employer; the employee’s Occupational Category or Categories, as set
forth in Appendix A; the employee’s reported tips; the employee’s
shift(s) and hours; outlet(s) worked; and the employee’s wages.
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(2) Gaming Establishment Records.
For each instance of toke and chip-cashing, where the information is in the
possession or control of the Employer, the Employer will maintain a record
of the dollar amount of tokes and chips presented to the Employer for cashing
by the toke committee (or other representatives of Eligible Employees), a
list of the tip splits furnished to the Employer by its Eligible Employees
or the toke committee (or other representatives of Eligible Employees), and
other separate records of the amounts presented to the Employer for cashing
by the toke committee. The Service acknowledges that the records of the toke
committee reflecting the actual division of tips may not be in the Employer’s
possession or control.
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(3) Food and Beverage Operations
Records. If the Occupational Categories set forth in Appendix A include food
or beverage servers, the Employer will maintain gross receipts subject to
food or beverage tipping, and aggregate receipts showing charged tips.
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(4) Tip Rates Records. The Employer
will maintain any other records relevant to determining tip rates, as may
be required by other governmental agencies.
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| The Employer must retain the records
listed in this section for at least 4 years after April 15 following the calendar
year to which the records relate.
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| F. The Employer shall furnish to
the Service the following documents:
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(1) Annual Report. An annual report
showing the following information for each Nonparticipating Employee:
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a. The employee’s name and
social security number;
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b. Occupational Category or Categories; |
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c. shift(s) and hours; |
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d. outlet(s) worked; |
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e. wages and reported tips; and |
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f. total hours worked in each applicable
Occupational Category, shift, and outlet.
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Tips reported to the Employer by a
Nonparticipating Employee do not need to be segregated by outlet.
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The report is due on or before March
31 of the year after the calendar year, or any portion thereof, during which
this Agreement was in effect.
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(2) Additional Annual Report. Unless
an Employer uses an Employer-Computed Tip Reporting Process (as described
in Section V.J and as certified under Appendix E) to compute and report the
tips of Participating Employees, the Employer must furnish an additional annual
report showing for each Participating Employee the information described in
paragraph F(1) of this section. The report is due on or before March 31 of
the year after the calendar year, or any portion thereof, during which this
Agreement was in effect.
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(3) Additional Information —
Food & Beverage Establishments. If the Occupational Categories listed
in Appendix A include employees of large food and beverage establishments
as defined in section 6053(c)(4) of the Code, the Employer shall provide annually
to the Service, on or before the Form 8027 filing date, the following information:
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a. the gross receipts subject to
food and beverage tipping;
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b. the aggregate amount of charge
receipts attributable to such gross receipts;
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c. the aggregate amount of charged
tips shown on the charge receipts;
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d. the sum of (i) the aggregate
amount of tips reported by Nonparticipating Employees to the Employer and
(ii) the amount the Employer is required to report under section 6051 of the
Code with respect to service charges of less than 10 percent; and
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e. the amount allocated to each
Nonparticipating Employee under section 6053(c)(3) of the Code.
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(4) Allocated Tips Reporting Requirements.
The Employer shall report on Forms W-2 issued to Nonparticipating Employees
tips allocated pursuant to section 6053 of the Code. The Employer is not
required to report allocated tips on Forms W-2 issued to Participating Employees.
In addition, the Employer is not required to complete the portion of Form
8027 related to tip allocations to Participating Employees.
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(5) Time and Attendance System/Payroll
Processing System Report. For each calendar year, the Employer shall provide
a report generated from the Employer’s time-and-attendance system or
payroll processing system that evidences the tip rates utilized by the Employer
in the preparation of the Forms W-2 and to implement this Agreement. The
report will contain information showing the tip rates for each Occupational
Category, shift, and outlet. The report will include the total number of
the Employer’s Eligible Employees as of December 31. The report is
due on or before March 31 of the year after the calendar year, or any portion
thereof, during which this Agreement was in effect.
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| G. If the Employer complies with
the terms of this Agreement with respect to its Participating Employees, provides
the information described in paragraph F(1) of this section with respect to
its Nonparticipating Employees on Forms 8027 (or the equivalent information
in an alternate form deemed acceptable by the Service) and Forms W-2, and
provides the information specified in Paragraph F (3), the Employer shall
be deemed to satisfy the requirement that the Employer prepare and file Forms
8027 with respect to all of its Employees.
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| H. If the Employer fails to maintain
or provide any material information in the manner described in paragraphs
E and F of this section, following notice and demand to the Employer for the
information, the Service may employ any lawful means, including the issuance
and enforcement of summonses pursuant to sections 7602, 7604, and 7609 of
the Code, in order to secure that information.
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| I. In the event of a material breach
by the Employer of its obligation to maintain or provide the information described
in paragraphs E and F of this section that continues following notice and
demand for the information by the Service, the restrictions in Section VII.A
on methods of determination of additional liabilities under section 3121(q)
of the Code shall be deemed to be waived by the Employer and shall be inapplicable
for all taxable periods occurring after the date of the material breach, and
the Service shall be permitted to determine employer liability by any lawful
means.
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| J. For purposes of this Agreement,
the term “Employer-Computed Tip Reporting Process” means a process
established, maintained, and controlled by the Employer under which the time-and-attendance
and payroll processing systems used for operation and management of the Employer’s
business are applied by the Employer during the term of this Agreement to
compute, without intervention by the employee, the tips reportable in respect
of each Participating Employee by:
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(1) tracking and reporting each Participating
Employee’s Occupational Category or Categories, shift(s), outlet(s),
and hours worked at each Occupational Category, shift, and outlet to which
the Participating Employee is assigned during a particular workday;
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(2) subjecting this information to
review and validation by the Employer’s management in the ordinary course
of business operations for independent business purposes;
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(3) recording and preserving this
information as part of the Employer’s time-and-attendance or payroll
processing systems or in other applicable and available business records of
the Employer;
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(4) applying the tip rates applicable
under this Agreement to the Participating Employee’s work assignments
by multiplying the tip rates by the total hours worked by the Participating
Employee at each Occupational Category, shift, and outlet worked during the
particular workday or payroll cycle (or in the case of amounts described in
Section V.E(2), determining reportable tips utilizing the list of tip splits
as determined by the toke committee (or other representatives of Eligible
Employees as provided in Section V.E(2) of this Agreement);
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(5) treating the tip amounts computed
under paragraph (4) as tips reported to the Employer by the Participating
Employee and withholding and paying applicable taxes on the computed tips;
and
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(6) reporting the tips as determined
by the Employer to the Participating Employee and the Service on Form W-2
for the taxable year.
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| K. The Employer’s process
shall qualify as an Employer-Computed Tip Reporting Process under this Agreement
upon the certification of the Employer, with the concurrence of the Service
(which shall not be unreasonably withheld), that the process satisfies the
requirements of paragraph J of this section. Qualification may be subsequently
reviewed by the Service in conjunction with the renewal of this Agreement.
Nothing in this section limits the Service’s ability to perform a Compliance
Review at any time of any underlying data per Section XIII.
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| VI. TIP EXAMINATIONS
OF EMPLOYEES |
| A. Except as provided in paragraph
B. of this section, the Service will not examine a Participating Employee’s
tip income for any taxable year that ends after the Effective Date of this
Agreement to which this Agreement applies, provided that each of the following
conditions is met:
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(1) The employee is a Participating
Employee for the entire taxable year (or such portion thereof during which
the employee earns tip income). In the case of a new employee, he or she
must become a Participating Employee within 60 days after commencement of
employment with the Employer as an Eligible Employee.
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(2) The Participating Employee: |
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a. reports the tips earned during
the taxable year to the Employer at or above the tip rates set forth in Section
VIII of this Agreement, or
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b. works for an Employer that utilizes
an Employer-Computed Tip Reporting Process to compute and report the tips
of Participating Employees on Forms W-2; and
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c. timely files a federal income
tax return for the taxable year that reports tips and wages reported on Form
W-2.
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| B. If an employee becomes a Participating
Employee more than 60 days after becoming employed as an Eligible Employee,
the Service may examine the Participating Employee’s tip income
received before the employee becomes a Participating Employee, except for
the period the employee was a Participating Employee of the Employer or of
another Employer under a tip compliance agreement (GITCA, TRDA, TRAC, or similar
agreement) during any taxable year. Once the employee becomes a
Participating Employee, the Service will not examine the employee’s
tip income received during the period the employee remains a Participating
Employee.
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| C. The Service will not examine
tip income of a Participating Employee for any taxable year that ends on or
before the Effective Date of this Agreement, provided that during that prior
period the employee was:
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(1) a Participating Employee, as
defined in Section IV, of the Employer under a predecessor agreement between
the Employer and the Service and satisfied the terms and conditions of that
agreement in that prior taxable year;
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(2) a Participating Employee, as
defined in Section IV, of another employer who had a Gaming Industry Tip Compliance
Agreement (or other tip compliance agreement, such as a Tip Rate Determination
Agreement) with the Service and satisfied the terms and conditions of that
agreement in that prior taxable year; or
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(3) an employee of (i) an employer
that did not have a Gaming Industry Tip Compliance Agreement (or predecessor
agreement) with the Service or (ii) the Employer had a Gaming Industry Tip
Compliance Agreement (or predecessor agreement), but the employee was not
an Eligible Employee within the meaning of that agreement, and the employee
filed, if required to do so by law, federal income tax returns for the three
taxable years that preceded the year of the Effective Date of this Agreement.
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| D. In the case of Participating
Employees of an Employer that does not have a certified Employer-Computed
Tip Reporting Process, if the Service believes on the basis of information
provided by the Employer pursuant to Section V.F(2) that the Participating
Employee did not report tips on his or her federal income tax return as required
by Section VIII of this Agreement, the Service shall confirm with the Employer
the accuracy of the Participating Employee data received from the Employer
prior to making any determination that tips have not been reported at or above
the applicable rates.
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| E. A Nonparticipating Employee is
subject to the full range of compliance and enforcement procedures of the
Service, at any time, including during the term of this Agreement. (The treatment
of the Employer in the case of Nonparticipating Employees is set forth in
Section VII.A(2)).
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| F. At the Service’s discretion,
the Service may continue any ongoing examination of any employees of the Employer
begun by the Service before the Effective Date of this Agreement.
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| VII. TIP EXAMINATIONS
OF EMPLOYER |
| A. With respect to any taxable year
during which this Agreement is in effect:
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(1) the Service may not assert liability
against the Employer pursuant to section 3121(q) of the Code with respect
to the tip income of Participating Employees (except in the limited case provided
in subparagraph (2)(ii) immediately below).
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(2) the Service may assert liability
against the Employer pursuant to section 3121(q) of the Code based on (i)
tips received by a Nonparticipating Employee if the asserted liability is
based upon the final results of an audit or agreement of the Nonparticipating
Employee or (ii) the reporting of additional tip income by an employee.
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| B. At the Service’s discretion,
the Service may continue any ongoing examination of the Employer begun by
the Service before the Effective Date of this Agreement.
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| VIII. TIP RATES |
| A. This section sets forth the applicable
tip rates under this Agreement. The Parties established the applicable tip
rates as follows:
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(1) Employees Who Pool Tips. In
satisfaction of their tip reporting obligations under section 6053(a) of the
Code with respect to employees who pool tips, these employees or their employee
group representatives (e.g., the toke committee) shall
present to the Employer a listing of the actual share of pooled tips received
by or given to each employee. This listing must reconcile to the tips presented
to the Employer’s cage for cashing. The tip rate in the case of these
employees is the amount of tips so reported to the Employer with respect to
each employee.
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(2) Other Tipped Employees —
Specified Occupational Categories. Based on information available from the
Employer, historical information available to the Service, and generally accepted
accounting principles, the Employer and the Service have agreed to separate
tip rates for the occupational categories or subcategories of Eligible Employees
(“Occupational Category”), shifts, and outlets listed on Appendix
A for each of the years during which this Agreement is in effect. These rates
specify tips received, by hour, by shift, by drink, by percentage of sales,
or other mutually agreed and verifiable bases of measurement depending on
the nature of the work performed.
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| B. Tip Rates and Occupational Categories. |
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(1) In General. The applicable Tip
Rates and Occupational Categories established by this Agreement shall remain
in effect for the term of this Agreement, unless modified pursuant to paragraph
B(2) or (3) of this section.
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(2) Mutual Agreement Process. The
Service or the Employer may propose revisions to tip rates or Occupational
Categories during the term of the Agreement. The non-proposing party will
notify the proposing party in writing of approval or disapproval within 60
calendar days of receipt of the proposed revision. The non-proposing party
will not unreasonably withhold approval. If accepted, the revisions will
become effective upon the date agreed to by the Parties.
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(3) Request for Tip Rate Modification.
Upon the occurrence of one of the following specific events:
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a. a significant change in the nature
of the business (or segment thereof) in which the Participating Employee earns
tips (e.g., an Employer converts an upscale restaurant
into a coffee shop),
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b. a decrease of 20 percent or more
in the Employer’s gross monthly revenue as compared to the same month
of the previous year, or
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c. a drop below 50 percent in the
participation rate of any Occupational Category as of the participation measurement
date,
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the Employer may request that the
Service agree to a modification in the relevant tip rate of an affected Participating
Employee within an Occupational Category (e.g., an outlet
or shift) that is appropriate in amount and duration, consent to which shall
not be unreasonably withheld.
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| The process established in paragraph
B(3) of this section for the revision of a tip rate upon the occurrence of
specific events in no way limits the circumstances that may give rise to a
request for revision of a tip rate under the mutual agreement process described
in paragraph B(2) of this section.
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| IX. TERM OF
AGREEMENT |
| A. This Agreement shall commence
on the Effective Date and shall terminate on . The “Effective Date”
of this Agreement shall be .
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| B. The Service and the Employer
agree that, beginning not later than six months prior to the termination date
described in paragraph A., they shall commence discussions as to any appropriate
revisions to this Agreement, including any appropriate revisions to the tip
rates described in Section VIII. In the event that the Service and the Employer
have not reached final agreement on the terms and conditions of a renewal
Agreement to become effective beginning on , the Parties may, by mutual agreement,
extend this agreement for an appropriate time to finalize and execute a renewal
Agreement.
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| C. Neither the Employer’s
nor the Service’s decisions regarding renewal of agreements are subject
to review.
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| X. TERMINATION
OF AGREEMENT; SURVIVAL OF TERMS |
| A. If employee participation is
below 75 percent of the Eligible Employees, the Service and the Employer shall
meet to discuss the cause of the decline in the participation rate and appropriate
measures to increase the participation rate. At the meetings, the Employer
shall provide information with respect to the records necessary for assessing
the tip rate and for assessing the procedures used to encourage all of the
Employer’s Eligible Employees to be Participating Employees.
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(1) If the Employer undertakes good
faith discussions with the Service on these matters and the Employer is not
in breach of its obligations under Section V.A, the Service may not terminate
the Agreement.
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(2) If the Employer fails to undertake
good faith discussions with the Service on these matters or the Employer is
in breach of its obligations under Section V.A, the Service may terminate
the Agreement.
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| B. The Service may terminate this
Agreement by written notice if participation falls below 50 percent of the
Eligible Employees. Termination by the Service shall become effective on
the first day of the first payroll period after the 60th day
after the date of the written notice.
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| C. This Agreement may be terminated
upon the joint agreement of the Employer and the Service, without the consent
of any Participating Employee. The effective date of termination shall be
as agreed to by the Employer and the Service.
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| D. If either party fails to comply
with any material provision of this Agreement, the non-defaulting party, at
its option, may terminate this Agreement by giving written notice of termination
to the other party. Termination of the Agreement shall be effective upon
receipt of the notice by the other party.
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| E. If this Agreement is terminated
pursuant to the terms of this agreement, the mutual obligations of the Parties
shall remain in effect through the effective date of termination. The agreements
set forth in Sections VI and VII shall survive termination with respect to
taxable periods (or portion thereof) that occur prior to the effective date
of termination.
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| XI. PRECEDENTIAL
VALUE |
| The contents of this agreement may
not be used or cited as precedent by any other Employer or other taxpayer
and will not bind, or otherwise control, the Parties for taxable years or
issues not covered by this Agreement.
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| XII. FAILURE
TO COMPLY |
| If the Employer fails or refuses to
provide any of the information required by this Agreement, the Service may
employ any lawful means, including the issuance and enforcement of summonses
pursuant to sections 7602, 7604, and 7609 of the Code, in order to secure
the information.
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| XIII. COMPLIANCE
REVIEW |
| The Employer agrees that a compliance
review or other inspection of books and records, as required for compliance
with the terms of this Agreement, will not be considered an examination or
inspection of books of account for purposes of section 7605(b) of the Code
or the Service’s policy and procedures for reopening cases closed after
examination, or an audit for purposes of section 530 of the Revenue Act of
1978.
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| XIV. EXCLUSION
OF CERTAIN EMPLOYEES |
| This Agreement does not cover employees
of the Employer working in housekeeping and those employees shall not be considered
Eligible Employees for purposes of this Agreement.
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| XV. OTHER AGREEMENTS
SUPERSEDED |
| This Agreement shall supersede all
existing tip compliance agreements between the Employer and the Service.
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| XVI. ENTIRE
AGREEMENT |
| This Agreement contains the final
and entire agreement between the Employer and the Service.
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| By signing this Gaming Industry Tip
Compliance Agreement, the Parties certify that they have read and agreed to
the terms of this document, including all Appendices.
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| EMPLOYER: |
INTERNAL REVENUE SERVICE: |
| By |
By |
| TITLE |
TITLE |
| EIN# |
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| Address |
Address |
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| Date |
Date |
