After more than 14 years pushing for beauty businesses to be eligible for a significant tax credit long available to restaurants, the Professional Beauty Association says it's now or never for Congress to act.
If the 45B FICA Tax Tip Credit update doesn’t make it into the 2025 federal tax package, “we’ll no longer pursue the legislation,” says Myra Reddy, Director of Government Affairs for the PBA. “The 2025 tax bill is the only appropriate vehicle for this tax credit.
"If that doesn’t happen, there’s nowhere for it to go until the next tax bill and that could take years," she says. "One way or another, it’s coming to an end.”
The credit applies to businesses with tipped employees, and currently is granted only to the food and beverage industry. The PBA and other advocates have been trying for years to get legislation passed that would expand eligibility to beauty and grooming businesses.
“This tax credit has existed for 31 years and the beauty industry still doesn’t have a way to apply for it,” Reddy says. “The service industry has been getting this but we haven’t. Both are highly tipped industries.”
Businesses with tipped employees are required to withhold and “match” taxes on their tips. Currently, the employer’s “match” is refundable to food and beverage businesses.
“If this credit makes sense for restaurants, then it also makes sense for salons," Reddy says. "It's a tax fairness issue."
PBA is urging the owners of salons, spas, barbershops, and other eligible beauty businesses to voice their support for the tax credit expansion to the House Ways and Means Committee before a public comment period ends on Oct. 15, 2024.
The nonprofit set up a letter-writing tool on its website to simplify the process for business owners wanting to comment, saying every voice is critical.
Though the PBA has gone through six lobbying firms over the years, the legislation has lingered without congressional action. Reddy is at a loss as to why.
“This legislation is non-political and totally bipartisan,” she says, noting that every member of Congress has constituents who own beauty and grooming businesses.
“We have done literally everything that’s been asked of us," she says. "Maybe our bill isn’t attractive enough to compete with what’s out there. Maybe we’re not the biggest or loudest. I don’t know what’s preventing members of Congress from supporting this legislation.
“It champions small businesses. It’s community driven. If you want to champion minority or women business owners, you couldn’t pick a better legislation.”
Lawmakers are generally awaiting the outcome of the 2024 presidential election before acting on the upcoming tax package. Reddy says that after Nov. 5, it’s go time.
“We want to increase our (Senate) co-sponsor list before the end of the year,” she says. “I’ve been individually reaching out to every single member of Congress. The more co-sponsors we have, the less likely we are to be left off again.”
To learn more and get involved, visit the FICA Tax Tip Fairness resource center on probeauty.org.