H.R. 7577

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7577 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 7577

To amend the Fair Labor Standards Act of 1938 to adjust the minimum 
wage for tipped workers and to amend the Internal Revenue Code of 1986 
to expand and make permanent the qualified tip deduction.

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IN THE HOUSE OF REPRESENTATIVES

February 13, 2026

Mr. Horsford introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committee on 
Education and Workforce, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
within the jurisdiction of the committee concerned

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A BILL

To amend the Fair Labor Standards Act of 1938 to adjust the minimum 
wage for tipped workers and to amend the Internal Revenue Code of 1986 
to expand and make permanent the qualified tip deduction.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Tipped Income Protection and 
Improvement Act of 2026'' or ``TIP Improvement Act of 2026''.

SEC. 2. MINIMUM WAGE FOR TIPPED EMPLOYEES.

(a) Minimum Wage for Tipped Employees.--Paragraph (2)(A) of section 
3(m) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A)) 
is amended to read as follows:
``(2)(A) The wage required to be paid to a tipped employee 
shall be the wage set forth in section 6(a)(1). All tips 
received by such employee shall be retained by the employee, 
except that this subsection shall not be construed to prohibit 
the pooling of tips among employees who customarily and 
regularly receive tips.''.
(b) Penalties.--Section 16 of the Fair Labor Standards Act of 1938 
(29 U.S.C. 216) is amended--
(1) in subsection (b), by striking ``the sum of any tip 
credit taken by the employer and all such tips unlawfully kept 
by the employer'' and inserting ``the sum of all such tips 
unlawfully used or kept by the employer''; and
(2) in subsection (c), by striking ``the sum of any tip 
credit taken by the employer and all such tips unlawfully kept 
by the employer'' and inserting ``the sum of all such tips 
unlawfully used or kept by the employer''.

SEC. 3. QUALIFIED TIP DEDUCTION MADE PERMANENT AND EXPANDED.

(a) Increased Deduction Limit for Joint Return.--Section 224(b)(1) 
of the Internal Revenue Code of 1986 is amended by inserting ``(twice 
such amount in the case of a joint return)'' after ``$25,000''.
(b) Prevention of Waste, Fraud, and Abuse.--Section 224(d)(2) of 
such Code is amended--
(1) in subparagraph (B), by striking ``and'' at the end,
(2) in subparagraph (C), by striking the period at the end 
and inserting a comma, and
(3) by inserting after subparagraph (C) the following new 
subparagraphs:
``(D) such amount is paid by a person who does not 
bear a relationship to such individual described in 
section 267(b), and
``(E) such individual does not have an ownership 
stake in the business which employs them in the job for 
which such individual is receiving a tip.''.
(c) TIN Requirement.--Section 224(e) of such Code is amended to 
read as follows:
``(e) Taxpayer Identification Number Required.--No deduction shall 
be allowed under this section unless the individual includes such 
individual's taxpayer identification number (in the case of a joint 
return, the taxpayer identification number of at least 1 spouse) on the 
return of tax for the taxable year.''.
(d) Automatic Gratuities Treated as Qualified Tips for Certain 
Professions.--Section 224(d) of such Code is amended by adding at the 
end the following new paragraph:
``(4) Treatment of automatic gratuities.--
``(A) In general.--In the case of an individual 
engaged in an occupation in hospitality, food and 
beverage service, or cosmetology, the term `qualified 
tips' shall include an automatic gratuity.
``(B) Automatic gratuities.--For purposes of this 
paragraph, the term `automatic gratuity' means, with 
respect to an individual, any amount which--
``(i) would be a qualified tip with respect 
to the individual but for paragraph (2)(A), and
``(ii) is a mandatory or suggested amount 
paid pursuant to a uniform policy of the 
employer, under which such entire amount is 
received by the individual or, under State or 
local law, is pooled and received only by 
employees of the employer under a tip-sharing 
arrangement.''.
(e) Deduction Made Permanent.--Section 224 of such Code is amended 
by striking subsection (h).
(f) Conforming Amendment.--Section 224 of such Code is amended by 
striking subsection (f) and by redesignating subsection (g) as 
subsection (f).
(g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.
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