the method by which we can address these matters. under the constitution and the separation of powers congress has no direct role in federal in enforcement nor triggering or initiating the appointment of any prosecutor for a particular matter. congress has a legislative role in deciding the statutory mechanism for the appointment of independent counsels or special prosecutors. in title vi of the ethics in government act of 1978. the attorney general was directed to go to a special three-judge panel of the court of appeals name independent counsel upon receipt of credible allegations of criminal misconduct by certain high-level personnel in the executive branch of the federal government.

in my give rise to the appearance of a conflict of interest. wisdoms in its infinite allowed to the independent counsel law to expire. the attorney general retains the authority to designate an individual was a special counsel. the irs and how untruthful they have been.

legislation that reenacts the ethics in government act of 1978. so an independent counsel can be appointed. >> i have a great deal of respect for the two members before the committee today. i've been fortunate to work with both of them. they have called for the impeachment of the irs commissioner. they led she obstructed justice and committed perjury. their ownch conducted

investigation into the so-called irs targeting scandal. it uncovered various management problems there was no evidence allegations of criminal behavior. or that he deliberately misled congress. there is no evidence that the commissioner acted in bad faith. this includes over 78,000 e-mails sent or received by lois lerner. hard to challenge this as an attempt to still rule -- stonewall the investigation.

it fails to support the allegations leveled in this hearing. raised by the gentlelady from washington. we should hold a hearing on criminal justice reform or gun violence. mr. gary: gowdy: they were about a half dozen offenses offered by the irs during the course of this investigation. it began with the two people in ohio.

which was that the irs was to accompany it to construct such a scheme. police we were equal in our discrimination they said. notpresident himself did personally approve this targeting scheme therefore you don't need to look at it. about the next hearing is the process that has been mentioned.

what the standard of proof? is it clear and convincing evidence? is it beyond a reasonable doubt? do the rules of evidence apply? can you use hearsay? impeachment is a penalty. that's exactly right. what congress really wants his access to the documents. you can't conduct an investigation if you don't have access to the witnesses in the since i have two

experts here. did i hear correctly that incompetence is not an impeachable offense? i was believed that malfeasance in office or the failure to perform the duties of your office could be an impeachable offense. is that your understanding? >> it could be a factor. how can it confidence be a defense when the allegation is incompetence? it doesn't have to be a crime. the idea that you can only who violates the criminal code is ridiculous.

was it negligently false that is what we want to investigate right. not the falsity of it but the nature of the falsehood. >> you are a. these are not criminal offenses. you remember 18 usc 1001. reckless disregard for whether a statement is true. going out of your way to avoid learning the truthfulness or lack of it of the statement.

we are in a situation where at best he just simply refuse to avail himself of the proper fact and testified on the roads and made a statement. fromalso have backup tapes 2011 no longer exists. is that true false? >> that is true. somewere unable to find but not all. clearly these documents exist recently went and found them. that was their defense. that was what they suggested. they destroyed a lot of saves obviously. there were other tapes of the inspector general just hop in their car and went to west virginia and asked for takes.

i think there were 1000 unique e-mails the reader five dollars i am looking forward to the next panel. i'm interested to hear how incompetence can be a defense to incompetence.of i think it will have to be a law professors that explain that one to us. one of these incidents with a group ofludes they filed for an honest nonprofit status for true the vote.

in december 2010 the fbi domestic terrorism unit inquired about one of those meetings. came back in january of 2011 to the fbi. all of a sudden having never theirudited before ever personal finances were audited for 2008 2009. of 2011mayat the fbi shows up. the irs sends more questions for the second round. some of these questions were including where have you spoken.

what did you say? and give us a copy of this speech and all your future speeches. irs inquiry. inquiring ine fbi november and december. true that will have more questions. losing streak patriots had more questions. in february 2012 the bureau of alcohol, tobacco and firearms shows up to investigate this organization. in july 2012 osha shows up to investigate their nonprofit status. texas commission on environmental quality shows up in november 2012. fourth round of questions from the irs.

the bureau of alcohol, tobacco and firearms shows up again. this appears to be an abuse of the irs. political persecution. by the irs. the irs knows how to get things done with their subpoena power. that's my mother-in-law calling. she has her own ring.

[laughter] get this information. they show up all these different times trying to get information. to your knowledge either one of you as the irs or any agency been held accountable for the abuse of power that they used against this one citizen back in texas. not aware of any. the accusation against against the irs in their of the numerous ones. the abuses that have occurred has anyone in the irs been fired. >> no. he stands by all of his statements.

the situation is dire it's bad and still available for targeting. nobody has gone to jail. we had a federal judge three months ago of the d circuit court judge in washington saying that the irs cannot be trusted. be familiar with that statement by federal judge. mr. farenthold: i get

frustrated and sometimes depressed and angry. i don't like the way things are going in washington dc. we passed hundreds of bills just to see them die in the senate. passood stuff that does the senate probably gets vetoed by the president. the president regularly bypasses congress with what i consider to be illegal and unconstitutional executive orders. the people of the united states want us to do something. they don't like the gridlock in washington dc. they don't like the high taxes they have to pay. and what they like the least is being lied to.

if you like your health insurance you can keep it. at the irs.ntees we have got to take a stand and say we are not going to be lied to in congress. in texas there is an anti-letter campaign that says don't mess with texas. it has become an unofficial motto of texas. we need to reclaim some of our constitutional authority here in congress. people need to be thinking don't mess with congress. the administration and their officials have learned you can obfuscate and delay. that is not the way to supposed to work. that is not aware where founding

fathers intended it. not the way the people who sent me to washington wants to see it happen. they want us to do our job and hold the government accountable. you'd shared to the government oversight and reform committee. are you seeing the same pattern? >> yes i am. i know you are passionate about these issues. that is why came to congress as well. delay and wey can can't let them get away with that. it is the principle. true on both sides of the aisle. it shouldn't be partisan. >> we saw it with eric holder. we saw it with fast and furious. you seen it with hillary clinton's e-mails. .his is our opportunity i am a cosponsor of your impeachment legislation.

the alphabet soup of executive branch agencies. >> i believe the constitution is an inspired document. in therethis mechanism for a reason. impeachment is a process by which we can extract that person if we're not acting in the best interest of the united states of america. i am looking forward to hearing from the law professors. my recollection from studying constitutional law was impeachment clause means high crimes and misdemeanors. congress decides what those are.

this is our opportunity to reassert our authority in our prerogatives. it is critical to maintaining the republic that the government officials who are paid by the truthfully andr promptly to the taxpayers representatives. >> with the remaining time there has been a lot said by the gentlemen on the other side of the aisle about how the department of justice has found no crime, no wrongdoing. usage continued where i left off on this committee. do you find that to be inaccurate. is it fair to say that the department of justice failure to see what you see so clearly as continue targeting is in fact part of a cover-up that continues to this day. not seeing what is in plain sight. things thate concerned about is that the fbi never interviewed the head of

the irs. questions of thoroughness. >> this investigation has yielded some very interesting results. the similarities between this and watergate are staggering. this is from wikipedia. the term watergate has come to cover an array of clandestine nine and often illegal activities. undertaken by people in the next

administration. such dirty tricks as bucking the offices of political opponents. they ordered harassments of activist groups. thepolitical figures using federal bureau of investigation the cia and the irs. evidence mounted against the president staff including testimony by former staff members in investigation conducted by the senate watergate committee. if nixon had a tape recording system in his office he could record many of these conversations. after a protracted series of bitter court battles the u.s. supreme court unanimously ruled that the president was obligated to release the tapes to government investigators.

revealing he had attempted to to deflect the investigation. there is such an eerie similarity. we have government officials that were persecuting their political enemies and going after them using the irs and other agencies. unlike watergate we have lost the tape. we can't prosecute these people because they destroy the evidence. watergate didnow not include any destruction of evidence. they try to hide the evidence. they didn't destroy it because the supreme court able to figure theut i was able to tell

president to bring the tapes forward. e-mails are like the watergate tapes. much like the 18 and a half speed ofp, the shear the hard drive crash experiencing system crashes on the subsequent erasing of backup data is highly disturbing. many of these e-mails were subject to congressional subpoena. the potential for true cover-up of the undermining of democracy becomes even more apparent. this committee is a critical responsibility. i hope the members from both sides of the i will give this matter the attention it deserves.

eight days after the latter asking for that information. do you believe that the irs followed the proper procedures when addressing this crashed hard drive in 2011? >> no i don't think so. how many of these sources were identified and examined by the irs? >> the inspector general indicated that five of the six were not sought or otherwise is thereted area >>

evidence that the destruction of these tapes was part of a concerted effort to not comply with the congressional investigation. >> we see nothing that implies direct intent. i want to be very careful with that. the irs will call it an accident. i call it a series of unfortunate coincidences. i think it is outrageous for anyone to think this was not a deliberate action. i hope we can get to the bottom of this. about what the irs commissioner new and when he knew it.

>> did they or did they not destroy the evidence? yes they did. did they mislead congress? no they did not. whether it is a democrat or republican it shouldn't matter. you cannot destroy evidence. that is under a duly issued subpoena. there should be a consequence of that. my purpose is to try to bring us back to what this is all about.

not to become too foundational. but we still hold these truths to be self-evident. that all men are created equal. but they are endowed by their creator with certain unalienable rights. life liberty and pursuit of happiness. to secure these rights governments are instituted. i think that this last sentence of that is the most important. deriving their just powers from the consent of the governed. whenever we have a government that uses the power of the irs or the police powers to deliberately coerce some of its citizens for their political views or for the religious views. is by their very definition. he.

this is a very big issue. do the government the obama administration use their powers to intimidate people because they disagreed with them politically. if they did that is profound. it is especially important for this committee who holds itself to be the guardian of the constitution. to respond to that. it is clear to me that coercion getting hurt. damage and impact did occur. on some of these conservative organizations. it is very clear that evidence was destroyed.

such arrogance and a flippant attitude on the part of the irs chief. whatever these great abiding principles of this country really are they are put aside flippantly for the sake of the political moment. i just want suggest you that i think this is an important thing. question to the witnesses? caseu think that in this the irs intimidated people based on their political persuasion? told the story that campaigning for office for the first time and asking to speak

in front of a group that was in the process of applying for tax-exempt status. me beingk out about there because i was a political candidate. i absolutely sought example of that kind of conduct. you think it was deliberate intent by the irs to intimidate people? >> yes it does appear to be the case. effort.s a concerted that was the conclusion of the inspector general. that is why this scandal has continued to grow.

that issue has been clearly document. >> the purpose of my questions was simply to find out if the abuse did occur. at least some of these individuals knowingly did that. >> i now recognize myself for

five minutes. i want to thank the witnesses. the problem here is the irs when after certain groups of americans because of their political beliefs. this hearing being an instance of grandstanding. they might've felt differently if the irs of been targeting other groups like an hour mentalists.

congress has to restore faith and trust. congress is investigating because of that. the irs broke that trust with the american people.

the fact here are not in dispute. they failed to comply with a subpoena. there was destruction of evidence. testimony.alse statement today said he testified truthfully. the fact is he did not testify truthfully. he failed to notify congress about the fact that evidence was missing. he said that he never asked to be the irs commissioner in the first place. as harry truman said, the buck stops here.

why did he assume the mantle of responsibility if he was not willing to be responsible. when they allow the destruction of the evidence action needs to be taken. whether it is done just through gross negligence. i wish that the commissioner and chosen to be here today. he's indicated he may come back before the recess i hope that he does.

i like to ask them why they irs failed to look inside those cases. was that something that was intentional? commissioner white in you notify congress about the missing e-mails for several months. he said since the start of this investigation of a single e-mail and like totroyed ask him why he said that

undergrowth unfortunately he is not here. they deserve to know that government officials knew it. was he so incompetent as to obfuscate the truth forever? that includes our hearing today. i can thank the witnesses for attending. you can submit additional written questions for the witnesses. the steering is adjourned.

is adjourned.g

in

in the committee will come to order. a special thanks for witnesses. taking time from their busy schedules for being here.

we look forward to the testimony. the new phenomenon in our society. this new economy goes by many names. online platforms. the even heard it called economy. it is changing the face of america. the dizzying pace of this change has presented opportunities and challenges. these new platforms and dramatically change the way we could work. this new generation of workers want to set their own hours.

on one on-demand platform on multiple platforms. this is the essence of economic liberty. the power of the free market. these entrepreneurs are running your bureaucratic resistance. they've gone largely unacknowledged. we hearing from a growing chorus there arens saying new and unnecessary obstacles to success in this field. people often pay too much in taxes. not having the records to back up their deductions. the irs has not been part of the solution for entrepreneurs.

a current tax system is not working for most americans. we will discuss some of these problems and discuss potential solutions as well. i'm looking forward to hearing from the panel. now we will hear from the ranking member ms. velazquez of new york. velazquez: development of has been a economy way to sell goods and services. it allows the selling renting trading of everything. the numbers strongly suggest that the sharing economy is here to stay.

interest as of september 2015, it was available in 60 countries. it is estimated to fulfill one million rides daily. it may be rooted in existing economic struggles. dislocated workers are seeking new ways to reenter the economy. it all becomes ways for ordinary americans to dissipate in entrepreneurship. rise of these networks has created new opportunities for americans.

while many of the workers in the are doing well they must be protected from unscrupulous individuals. atypically employee -- define them as independent contractors nonemployees. no tax withholdings. trying to determine whether certain workers qualifies employees rather than independent contractors. lawsuits over whether companies have been. the challenge is to ensure employees are protected without stifling promising innovations.

if the employer controls the say he ise you independent? workers are connected to consumers through online methods. it seems to be trading at the expense of hard-working americans. $15 billion in underpaid unemployment taxes. as these technological revolutions advance, it is also important for this committee to monitor what is happening in the new sharing economy. risks onn minimize activity for small

businesses. i would like to thank all of our witnesses for being here today. you add significant value to the committee's discussion of this issue. sharon: i will take a moment to explain our timing. there's a lighting system on your table to assist you. deal a light will sell you have been amended to read about. our first witnesses caroline bruckner.

taxation and managing director at the center. she directs the team is small business experts and researchers. she served as chief counsel for the u.s. senate committee on small business. our second witnesses rob willie. he is vice president of test rabbit in san francisco. users who want to outsource errands for a fee. the company started in 2008. he is created marketing campaigns for several businesses. nike cadillac and. nuclear.

he specializes in application development issues. the subcommittee on health technology. he is also testified before the u.s. senate. he also serves on the advisory council of the mobile health care organization. i introduce mr. joe kennedy senior fellow. advice tovided legal individuals in the public and private sector on these issues. he previously served as the u.s. department of commerce.

he has a masters degree in agriculture and applied economics. ms. bruckner: thank you for the interpretation to join you today. when it was caroline bruckner. i am the managing director of the co-god tax policy center. we're currently focused on the tax compliance issue. small business owners are renting rooms in providing rides and serving consumers in various business transactions. companies such as airbnb uber lift and many others.

a report entitled shortchanged. what is driving the online platform economy? having spent more than a year investigating these issues, for tax purposes service providers in theirrs are in fact millions of them. working and earning income in ways that are not readily identifiable in the government's existing categories. these issues should be considered by congress. not only because millions of american taxpayers have to comply with these antiquated tax rules. they have a very real implication on treasury policy. more than 2.5 million americans

are employed in the on-demand platform economy. this represents explosive growth on this market segment. a 56.5% increase in alternative work arrangement. people do cycling out of the land that form economy. ranges monthly income from $550 to $3000. by and large the majority of individuals in this economy work less than 50 hours a week. dozens of individuals currently participate in that economy. our objective was to assess whether these platforms exist.

they are experienced self-employed small business owners. survey revealed that among those who turned income in the online platform economy 22% of all not know whether they were required to file certain tax documents. 43% growth aware as to how much they would on taxes. half didn't know that any tax deductions expenses or credits related to the online platform economy. they could face potential audit and penalty phases. now they have relatively low amounts of earned income. which of time preparing returns and taking down questions.

againrd time and time that the small businesses operating in this segment generally want to be honest and payment they owed. those options don't exist. one of our survey respondents they did not receive a 1099 from their online platform. this is not surprising. the statutory requirements for filing them are very complicated. current tax system is not working for a significant percentage of new companies. the problem is a lack of information and understanding. these tax challenges are only

going to continue to grow. with the increase in the number of small business owners. comes to filing taxes on the income earned from the online platform work. everyone is losing under the current rules. economy players and the irs deserve greater efficiency and thank you for the work you do on behalf of america's small businesses. and rob willie: thank you for the invitation to testify today. there are legal regulatory and public policy challenges. platforms like ours can improve their daily lives.

we set out to revolutionize everyday work. we decided that we needed a one that people stay in the house paint a room or possibly mold along. new york is our largest market. san francisco is our fastest growing market. 5000 active at any given time. they company these everyday tasks. to change the face of these industries by representing their everyday needs. we consistently support the effort toward flexible hours. on an average of $35 per hour. we caught everyday work for everyday people.

10% of our testers work full-time. many of them have tripled year-over-year. it consistent with the larger platform economy. support to better support themselves and their families. the on-demand platform economy has become an important platform when volatility changes individuals and family. platforms like ours provide a new earning option that is accessible to millions of americans. platform, the emerging economy has sparked intense debate on the classification of workers versus independent contractors. the current classification system was defined around a much different era, and has been shaped by decades of regulations

and court cases. as a result, while we cannot support our pastor's while preserving -- taskers, as professor caroline bruckner noted, many participants who do not know or are not fully aware of both the tax obligations and the benefits, as a result of earning income. that taskrabbit know others are facing these challenges. they sign up to join our platform, making their first foray into the world of self-employment. some of them do not understand the economic triggers that require the filing, but many do not. it is our interest to see our taskers see a better understanding of compliance and planning, greater stability and transparency would help maximize return on participation in our network. it is their freedom as entrepreneurs.

today's topic is just one of many where taskers could benefit from better training. they're looking to better market themselves and services, access health care, and plan for retirement. we would like to be a resource, a partner, and collaborator for them. we urge congress and relevant government agencies to look at participating in this emerging platform market place. as a pioneer of this emerging market, we welcome the opportunity to work with policymakers as our company grows and matures. we consider this engagement ruling on many levels. just last month for example, we begin the first technology company to announce that we would follow the diversity principles outlined in the congressional black caucus and the tech 2020 initiative. mr. chairman and ranking member velasquez, we thank you for your interest and taking the time to understand our business, and how it is changing what we call the

future of work. we appreciate the bipartisan interest in the platform economy, most noticeably by the committee cochaired by congressman isaacson. we hope we can find solutions that will further enable task rabbit and the economy to grow. and to empower all business owners across the country. thank you. >> mr. reid, you are recognized for five minutes. >> ranking member velasquez and distinguished members, my name is morgan reid. thank you for holding this important hearing. association represents 5000 staff makers and connected device companies across the united states. our members have enabled the rise of the sharing economy leveraging the connectivity of smart devices. sharing economy companies have grown rapidly over the past

decade because they allow instantaneous communication secure transactions, and personalize relevance to consumers. moreover, these same factors allow small businesses and tens of millions of americans to earn more for their families with a disability and autonomy that flexibility and autonomy. these opportunities will cease to exist if that federal regulations continue to hinder growth. i want to highlight free actions that affect our members. first, congress and the internal revenue service should take great care to ensure that the federal tax code enables, rather than stifles the sharing economy. specifically, treating them as employees are the federal tax es would be detrimental. we need transparency in the resolution process, including the ability to settle disputes with the irs in an effective and efficient method. legislation like that imposed by

senator rob portman can ensure that. congress should ensure fairness that internet sales tax are based on the location, calling congress to reject proposals that would force businesses to become -- policyond the specific request and legislative language, i would like to take a moment to illustrate how the sharing economy is far more than existing packages. the popular media tends to describe the sharing economy as a disruptor of existing business models, ebay replacing the yard sale, uber replacing the taxi. but this is a false or at least limited dichotomy. the sharing economy not only replaces also creates new concepts in people engage and interact. or example, a business in chicago utilizes a sharing platform to connect nutrition

coaches from across the country to consumers seeking a healthier lifestyle. using the service, dedicated services help consumers meet the goal. but they do not merely connect expert. nutrition a if ultimately switches the paradigm by getting users to change bad habits, not just the once a month meeting you would receive with traditional care. users can take pictures of food they are eating, share it with their coach, and get real-time feedback and enforcement. coaches get inside about their existing habits of the user, so they can step in before that decision is made. actively working to prevent diabetes and other health problems. in short, creating healthy habits is relationship-dependent. it does not exist without the tools that create our modern sharing economy. would merely have individual coaches trying to change bad habits given an isolated 60 minute session.

there is no possible way that every coach and registered dietitian would provide their own tools. nor could a company writing the software afford to hire an army of nutrition coaches, and and hope to create a user base. the only way it works is through the sharing platform, one that allows users to find health they need, and for the coaches to build a take as many or as few clients as they want. everyplace is no existing industry. and there is a story like this in every single district in america. each one of you received a packet of baseball cards with companies from your district. not all of the businesses are all part of the revolution taking place. one that is moving high, beyond just big companies, in fact, our most recent study showed that 82% of the top app companies are small businesses. most which hail from other than silicon valley. the company that you have in hand are looking to grow and

succeed, each with their own vision of what success looks like. but the success of the sharing economy is predicated on the success of a power tred universe, opening up a bricks and mortar location and providing services online, and four platforms to track users through better training, tools, and clients, without triggering a change in tax status. we urge congress to ensure the rules we follow make sense in an age where the neighborhood yard sale is now nationwide, and the daily client may not live in the same country. the system empowers the sharing economy, and offers incredible and benefits to each and every american. and i look forward to working with you to advance measures that empower innovation. >> thank you very much. >> mr. kennedy? mr. kennedy: thank you for the opportunity to discuss this with you. the approach to this topic is driven by three considerations. the first is that, while the

sharing economy is growing rapidly, it is still representing only a small fraction of an increasingly diverse labor market. forums areernet delivering tremendous value to both consumers and workers. workersvey of over 4600 from 11 platform companies, only 7% said they were dissatisfied with the experience. workers earned an average of $7,900 over the previous 12 months, which accounted for 22% of the total household income. the average hourly earnings was $28. the third consideration is that the traditional employee and independent contractor distinction no longer serves much purpose for a growing share of today's labor market. theally by default, common-law test has become the basis for determining whether all of the major federal and state labor laws apply. the results is a large amount of

uncertainty and litigation that discourages companies from supporting gig economy workers and consumers in a variety of ways. some of the ways that companies have said they would like to support the independent andractors include training access to business and financial advice. such efforts can be enormously valuable to workers, who are, after all, for all intents and purposes, running their own businesses. within the tax field, help with tax advice, record-keeping, and withholding would be especially important. the tax laws are enormously complex. workers need to make a number of important decisions, including what form of the business to create, whether to set up a new savings plan, and what salaries to pay themselves. they need to determine what expenses are deductible and begin keeping the necessary records. and they need to complete the

tax filings in a timely manner. in a survey, 20% of online workers listed understanding tax and legal obligations as one of their top challenges. in addition, these platform companies could add value to both workers and consumers by setting prices, handling transactions, letting parties rate each other, and conducting background checks. such activity is also used as evidence of an employee and employer relationship. public policy should encourage companies to support their workers' carrer, irrespective of the relationship. if a company is beholden to all workers, but pay for access to tax business advice, or extends benefits to independent contractors, why would we want to discourage that by insisting that it must also a

subject to minimum wage collective-bargaining and unemployment legislation? report, i argue there are three approaches that congress can take to begin modernizing the nation's labor laws. the best option would be for congress to amend each federal labeor law, by replacing the common-law with a specific piece of legislation. the second approach would be to define a third category of workers, somewhere between an employee and an independent contractor. finally, congress could give platforms devoted to personal services a temporary exemption from most labor laws. the workers of many of these platforms are clearly independent contractors anyway, under the common-law test. the small size of the gig economy and the temporary nature of exemption reduce any risk to the broader labor markets.

the world around us is rapidly changing. work arrangements will continue to diversify, as companies respond. congress cannot dictate the shape of future work arrangements. it can however play a large role in helping workers in the kind of support they need to have good careers that fit into their increasingly complicated lives. thank you again for the opportunity to appear before you. >> thank you very much. we appreciate the testimony from the panel this morning. we will now ask questions. i recognize myself. i will start with you. you testify that more than 60% of your survey respondents did not receive a form 1099k or a miscellaneous form. what changes would you suggest to benefit both workers and the irs? >> i think that the first thing we should do is recognize that the instructions for the form 1099 miscellaneous direct people

to use the form 1099k for credit card reporting or payments made by credit cards, and that creates a tax reporting loophole for income that is earned by less than $20,000 because there is a certain income threshold for using the form 1099k. and i think the irs should medially consider the instructions on the 1099 miscellaneous and see if it can be used for credit card payments the income threshold of $20,000. >> do you have a sense of how many folks are not complying with the tax code, because it is i'm talking about the sharing economy. versus, i'm not one to pay my taxes? caroline: that is a good question. i don't have a hard number on that. but i can tell you anecdotally, when we talk to folks that are in the sharing economy or me talk to tax preparers that specialize -- we talked to tax

prepares that specialize in earned income with platform related work, there a medially confused as to whether they had a taxes on the income earned because in many instances, they denied any 1099 at all. >> thank you. i will move to you now. we heard a lot today about the tremendous projected growth of the sharing economy in the coming years. rabbit's the task estimates, and what you see as having the best growth potential? >> if history is any indication of the future, which we believe it is, year over year to date we are growing at 4x on a revenue basis. we are also growing tasks. we have 15,000 organic applications on a month-to-month basis. both of those indicate that one, we are still in the very early days. and what the sharing economy can do, two, we are a figurehead of growth. >> thank you. mr. reed, i will move to you.

we discussed the complexity of all of this, how hard it is to get information, how to figure irs codemply with the under existing code, very confusing. is it possible that there is some enterprising entrepreneur out there that could come up with an app, form their own company the kind of salt this problem -- solving problem, rather than the government? >> number one, yes. in fact, there have been some early to market applications that attempted to make the switch. one of the real discoveries that we found is that an application that is on your device to help you with taxes is one you likely only turn to at that moment of panic. what we're really seeing now is that the fact you have to do an integrated application, but you need to be able to pull in the itformation from taskrabb

into your tax preparation software on an ongoing basis, so you can keep track of it. that leads to one of the confusing elements we have been discussing. if any of these companies were to provide that kind of interactivity, and that ongoing information flow and the training, well, that might trigger the case of them being considered employees. so on the one hand, while it is difficult to put an application that draws the right information, and in the platforms are concerned about the liability they may take on by providing us the very thing we need to satisfy the first question you asked, how do we get people to pay their taxes? >> thank you. time for one more question. mr. kennedy, even if we were able to government a temporary legislative moratorium on the sharing economy, as you suggested, you correctly point out that there are myriad relevant state and local laws on the sector.

how would you address inconsistencies between federal action versus state and local? two tonedy: yes, i say that. the first thing i would say is there is room for increased dialogue between the states and the federal government about what the common rule should be. we would like, i think ideally, re to be consistency at the federal and state level. encouraging reform at the state level, managing reform at the federal level would be important. and the second is that congress can, to some extent, preempt state law using the commerce clause. there is room for debate about where that line is. fori think there is hope preempting a lot of the state legislation now. >> thank you very much. my time has expired ranking member is recognized. >> mr. kennedy, in your

testimony, you touch on this issue. but i like to hear more discussion on it. there is a level of complexity inherent in operating a business that straddles the boundary between wage employment and self-employment. what can be done specifically in tax law to overcome this challenge? is it creating a new hybrid definition of an employee, or amending the irs safe harbor rule? sorry, myy: i mean, inclination would be to amend the safe harbor rule, to create a brighter line between the employee, where a particular law applies, and where it does not apply, so that people know what side they're on. i think you can also, for people who only make a little bit of money on these platforms, you can raise the threshold so that they do not need -- they still need to report income and pay taxes on it, but they don't need

to make quarterly payments. two, think there are hopefully minor, reforms that would make a difference. >> thank you. ms. bruckner, there has been some concern from traditional brick and mortar businesses about the emergence of the sharing economy business model, and how it affects fairness. while i do not advocate one business model over the other, how do we ensure that actions entrepreneurship through new methods do not disadvantage businesses that invest time and money to conform to existing regulations, when classifying their orders? ms. bruckner: i think the first thing you can do is promote understanding of what your tax filing obligations are. because people view unfairness when they think that other people are not paying

their fair share. if we take action on outreach and education, on what income you need to pay taxes on and really promote what your tax filing obligations are, then we are creating an opportunity for people to actually pay their fair share and creating transparency, and making sure that folks, be they in the sharing economy or working for a brick and mortar business, are both paying their fair share. >> mr. reed, any comments on that? mr. reed: i think what the studies have shown from ms. bruckner and mr. kennedy is that that paradigm of brick and mortar store, as an entity, is almost nonexistent. sure, there is a corner bodega that sells ice cream and sundries that will be isolated. but you will have a mixed economy. i started a bike store when i was younger. i still own part of a bike store. well, we sell part of our

equipment online. we get rid of stuff online. we use services like ebay, etc. even your corner independent bike store is probably going to have interaction in the sharing economy. and so, while it is important to preserve the rights and capabilities of the brick-and-mortar store, we have to understand we are merging into an always connected, always in line, and candidly always selling economy. >> your views on that, mr. kennedy? mean, yeah, i think somebody who is paid $1 million for the medallion in new york probably feels a bit aggrieved. but i think if you look at it objectively, uber is a better model. they are reducing prices, serving neighborhoods that traditionally have not been served so well. and the riders seem to think it

is a better experience. so the answer, i think, is not to go backwards to the traditional model, but to free u p the traditional taxicabs and brick-and-mortar businesses so that they can participate more in online experience. and you see taxicabs actually starting to put out their own apps now. so, reforming some of the traditional laws and regulations would be more appropriate response. >> thank you. ms. bruckner, if workers are found to be misclassified, what other penalties on the tax code would they then be penalized under other laws, like the fair labor standard act, as well? mr. bruckner: our research did not look at the legal implication. we thing that is a part of the debate that impacts a very small segment of the overall sharing economy. and that there are much larger

and broader implications for the growing numbers of independent contractors, freelancers in general. our research focuses specifically on the existing tax compliance challenges of those operating as self-employed small business owners generally. there are absolutely ms. classifications that occur -- misclassifications that occur. and they are extensive legal problems. onus onre putting the the small business owner and with the challenges are. >> the gentlelady yields back. gentleman from new york, mr. gibson, is recognized for five minutes. except he is not here. who is next on our side? ok, the gentleman also from new york, is recognized for five minutes. >> this is a fascinating topic. the underground economy, as you know, is growing. and part of this whole

conversation has to do with noncompliance. of said $2.5 billion unreported potential income. but there is unity that the tax code is not encouraging this, is not caught up to the issue. government'she desire to eliminate the notion of independent contractors, so they all fall under the auspices y that is helping them open this business, right? and yet, that does not solve the problem. , there is and that issue -- i mean, for the irs to go out, and people are not sending to 99s because they don't require them, who is breaking the law here? if they are, how would even know it? let us face it. you are saying people, people

are not complying, implying they are uninformed. but we all know we have to pay taxes. we all know that if we have income, we oh somebody something, or at least a report saying that we fell under. but i do not buy that people do not know they oh something to someone. -- therethink there is incentive to make everybody a private contractor. because look at what you avoid. the whole fica issue, the health insurance, all of those things. so, i think it is a really, getting issue. i'm interested in response you might have, ms. bruckner. who would not want to be like rabbit, saying they are independent contractors and we are not responsible for anybody? that would be ideal for you. you collect your percentage and

move on. but yet, it is a problem. it is a big problem. mr. reed? mr. reed: having been a small business owner, on both sides of this, i am sure i would completely agree with the concept that everybody would love independent contractors. as someone who owned a small business, one of the reasons i hired employees was that i could count on them to be there. as i pointed out, lots of drivers drive for both uber and lyft. you have employees in a state of competition with you, right? constantly offering incentives, find new ways to entice them to stay, not jump ship. one of the event of his you have when you own the business, is that you have the opportunity cost of having them there, but it allows you to -- i think we are making that decision on an ongoing basis. taskrabbit, has employees, don't you?

>> thank god, i am one of them. [laughter] >> i agree with you. i am new to this job, right? i get it. but we have to find a way to this incentivize the companies from doing that appropriately, and at the same time find a way to help people pay what they are owed. because the irs cannot run around chasing down everybody who owes them $500. >> i do not argue that we need to create the right set of incentives for both company and 1099, or taskers, as we call them. but legitimately, right now, taskers are saying they value flex ability the most. they need to be 1099 contractors. one of the factors, to however

them filing the taxes or receiving training in any regard, learning have a better ability to work around training. and that is ultimately one of the barriers to i think the issue we're talking to today, and more broadly how to interact with his workforce in a meaningful way. >> do you agree with that mr. kennedy? kennedy: i would also add that if you're talking about withholding taxes, or providing health care benefits, the economic evidence is that the employee ultimately pays for that in reduced to take home pay. it is not really the employer is benefiting. it is possibly the employee. so, i think there is -- one of the reasons i suggested the temporary exemption is that i think there is a real goal for

the companies to come forward in certain areas and have a closer relationship with their employees. and tax is one of them. because all the records are electronic. and so, providing the irs with the information is very, you companies aree afraid this will come back to bite them later, in the form of a disgruntled worker saying they were misclassified, or agency humming in center dot do this or that. .> worker's comp thank you, chairman. i get all that. what is one last thing, the informal health care act -- the affordable health care act, regardless of how you feel about it, it impacts that in an enormous way. people in marginal positions and income have the potential to have their cost of that

particular health grow. it is incredible to me. from what we read all the time, so thank you. my time has expired. >> the gentle lady from california is recognized. >> thank you ranking members. thisee with my colleagues, is an interesting topic. and certainly, there are a lot of changes underfoot in how small businesses are operating, how they pay taxes, how they impact the consumer. so it is really interesting. one of the things professor you,ner, i wanted to ask because you noted in your 22% of thehat members of the national association of the self-employed responded that they work with an on-demand platform company like uber and airbnb.

almost half did not know about any tax deductions, expenses or credits that they could claim related to the on-demand platform income. and while most of the discussion so far has been whether they are paying taxes, in general, what kind of tax reduction's, expenses, or credits can be claimed for those in that industry? and also, what can we do to many better educate this group on the availability of some of these savings? is a greater: that question. starting off with the most obvious answer, when you drive for a business, in many instances, you can deduct the miles you drive. the question is, do you do. actual miles, or using a standard deduction formula that is in the tax code? in addition, depending on where you work, if you are selling

goods online, that you produce outside of your home, can you take advantage of the home tax office deduction? are there startup expenses you might qualify under the code to extend and becoming your small business? it is really surprising to us that this experience, self identified itself employed population was not aware of the deductions and expenses, and even tax credits that could apply to them. which means that they could be very well leaving money on the table when they go to file their taxes. >> thank you. wileygoing to ask mr. from taskrabbit, i know we are talking about taxes in this session, but i was just want to have the opportunity, since you are here, you know, love the business model, love the concept.

if only our kids would do their chores, we would have to hire taskers. [laughter] but one of the concerns, that i think some of us have, is, you know, background checks of those who are now becoming taskers, coming into our homes. can you walk us through how taskrabbit administers background checks for these taskers? mr. wiley: sure. i think trust and safety, prolifically, is a big priority. it is important to state that, in the marketplace every day. and/or onecruiting boarding taskers is something that we look at everyday to make sure it is the best process possible. in doing so, like i mentioned,

15,000 potential taskers apply the marketplace every month. what that includes, the submission, a form online, with basic contact information, of which we then -- which includes social security. for, andcurrently pay based on that process, they then come in person for a one hour orientation to learn the processes and procedures of our marketplace, as well as how to answer for app to potential work. >> i'm running out of time. but it is fascinating that we are talking about $35 an hour. i mean, that is like five times the federal minimum wage. that is incredible. you state thousands of applications are coming to you, without any direct recruiting or marketing, in the district i

represent in los angeles, you know, there are a lot of folks who are looking for work, many of the neighborhoods are low income neighborhoods. you reach out to some of those other communities in our country that may be perfect to find some of these jobs? what can you do to help people find some of these good paying jobs? >> it is a good question. we thank you support for the city of los angeles. you are one of our biggest markets. [laughter] well, no comment on that. however, i think you are right. there is more potential opportunity for us to do broader outreach, to have a broader portion of the market of the population find new work opportunities. and we consistently support that with one, a livable wage. that is most important to us.

two, the flexibility. doause 90% of our taskers not work full-time in the marketplace, so their love the great new work opportunities. and the third thing, most important, this idea of transfer ability of skills. if we can consistently train those that work in the marketplace with broader skill sets for them to take on, and in the future, then do bigger and broader things, not only does the existing marketplace benefit, but as the clients receive better services. >> the gentleman from mississippi. >> i appreciate you being here today. i have a kind of very -- people do not like change. and governments do not like change. some of the other comments i have heard, this is a system that works. but it is different. and i think the same thing with

overtime rules with small businesses, what governments do not understand, they try to make it fit into their mold, their box, and the net reality is that it does not work in that box. they have to work to adapt the sharing system, and the small businesses, and not try to adapt them to the rules that apply to everyone else. if we do that, credit for small businesses or sharing economies to be a part of the regular tax assess or agency process, what happens is you fail, because we tried to insert ourselves. we need to change, not ask you to change. what i find interesting is that the interesting -- the syrian the sharingery -- economy is very interesting. it applies as a secondary income, not primary. a lot of time, they are paying taxes in a primary job. they have health care in the primary job. it is very flexible. you hit it.

most of them are students, retirees, stay-at-home moms, soldier's wives. people who may be moving locations, or tied to other duties, so that flex ability of the most important. what can we, as a small business committee, do to make sure the people who want to pay taxes make sure they pay them? but make sure we keep open with flex ability? i start with you, miss bruckner. miss bruckner: we need to be educating other members of congress about the sharing economy, and the fact that it is just not millennial phenomena. if you talk to the platform companies, some of the fastest-growing cohorts they see across the board are baby boomers. this is affecting all sectors of our population. , generally these are people doing this part-time or as a secondary source of income. and hassles they have to face,

combined with the tax code obligations, are something we should deftly consider moving forward, how we make life better for the taxpayer going forward? >> any other comments from the panel? >> i think that one of the key elements we have touched on considerably is ensuring that the irs allows us to provide the training, so that we get these people to understand their obligations. i think it is ironic, here we are having a panel about people paying taxes, and as mr. wiley talked about, we are concerned that in order to make it easier to understand how to pay taxes, we might actually destroy the very business model that allows that flexibility. there is one conundrum out there that exists, and it is the idea that we can find ourselves in the wrong classification, trying to help the iris do their job -- irs do their job.

>> i think the sharing economy is great. just like i think small business is great. i sometimes think people are threatened. quit, getting your tail you do not change rules, you get better. and you steal or copy, whatever you want to call it. i will go back, miss bruckner, in a growing sector of the economy, is or anything this economy can do educationally to inform taxpayers, why we work to make the guidance more clear, here is what we should be doing in the meantime? ms. bruckner: i think the one thing the irs can do is to start working through relationships with third-party preparers and tax preparers, educating them. they do notances, even know how to advise customers that come in and need help with their taxes related to

the sharing economy income. i think leveraging the third-party relationships, and increasing outreach and even tax preparers and folks that are engaged in that industry, would be a great start. d, i'll let mr. ree you comment if there is time. sales tax is a big issue. i think we cannot just say it is better where it originates, or ends up. because a lot of localities, county disabilities rely on that sales tax to inform for services like police and fire department. i think we need a healthy discussion on that to determine what the best answer is. with that, i yield back. .> thank you >> we're talking about the irony of the irs, what we need to do, and the committee i left to come here, currently, the topic there is whether or not we should impeach the irs commissioner,

right now. a kind of boggles your mind. that being said, for the record, i will now recognize the good lady from north carolina, ms. adams with the ranking member of the investment oversight committee. >> thank you ranking member velasquez, and to the participants today. the sharing economy is certainly a new aspect of our economic system that we must play close attention to, in order to properly provide effective oversight, with regards to work last vacation. start, ther, to classification is nothing new in labor law. in fact, last year, you saw in arizona four construction companies that were labeling independent contractors to pay back wages. what makes the sharing economy harder to regulate than the traditional workforce?

ms. bruckner: i think what is difficult and unique is that when you look at tax policy purposes, you are not just looking at companies like lyft or uber. but we also look at it in terms folks youd airbnb, would not even think to put in the same application debate. it is much bigger when you look at how these people are earning income, and obligated to file for u.s. tax purposes. it is a different question. and that is what our research endeavors to point out. >> there are quite a few federal and state laws that define the employee relationship, and that of the independent contractor. is it possible a worker could be one, ann employee under independent contractor under anotherms? ms. bruckner: i think that could happen.

but classification happens in all kinds of circumstances. those are issues we do not suggest specifically, but we focus really on how the taxco code is not working for american taxpayers that are just trying to earn income in the sharing economy. >> thank you. so, would you know if there are tax applications for situations like that? ms. bruckner: i was early venture to guess there are, but i do not cover that in either my testimony or in the report we put out. >> what role does technology play in blurring the lines between an employee and an independent contractor, do you think? mr. reed, what about you? mr. reed: i have the suspicion that all of us would agree that the technology we have is what empowers the sharing economy. the ability, let us use location -- the most obvious example. without the ability to know the

cannot knowskrabbit who to assign. how long will it take them? the entire function of the chair and economy works because i can pick up those spaces in between your other jobs, your other tasks, when you drop the kids off for day care. and i can it work in both space and time. without the power your smartphone provides, we do not have the sharing economy. >> would anyone like to, mr. wallace? >> i completely agree with that. i think task rabbit was founded in 2008, the first year the iphone 1 launch. that is not love. technology certainly empowers us, both in matching taskers with legal clients or consumers, but also building supply and demand to do this in a real-time, high-quality experience geared both of those things are simply powered by

mobile technology. >> thank you. mr. reed, the sharing economy remodels on the infrastructure of the platform. what should the businesses do to ensure that the infrastructure's growth keep space? s pace? >> we would always encourage the company to encourage ways to the it more enticing, for people providing the service, to be a part of it. and that is down to training, providing easy access to the client you need to find. i thought it was interesting that ms. bruckner brought up entire business of physical goods. thing the platform needs to provide is easy access to a customer who wants the service. the second thing is a trustworthy space. if there is one thing that drives our ecosystem to success or failure it is the trust the

client puts in it. do i trust the person giving me a ride? comingi know the tasker to my house should be let in the front door? trustworthiness is a critical, critical element. >> thank you very much. gentlelady's time is expired i want to thank the witnesses for being here today. i have one final question. i noted that you have an office in london. i happen to be on the foreign affairs committee. i just wonder, how is the u.s. doing compared to the rest of the world and the share economy? re: head of the game -- are we ahead of the game or behind> if you want to comment on how things are going around the globe? >> i can comment on the u.k. and london specifically. as relates to our business, there is no doubt that the united states is ahead of where in rest of the world is,

terms of the cheering economy and the adoption of services. that said, the fastest growing emerging markets in the world and the sharing economy are not in the united states. ispecifically for us london our fastest growing market. there are different dynamics, whether it be around taxes or nuancesare, that create as to how companies go to market. and how do they work with taskers to create new opportunities for companies like taskrabbit. that said, expansion is one very interesting and i think new opportunity for us, that will be done by us very carefully. because we understand the marketplace dynamic. >> where is the cutting edge around the world? is there one company particularly ahead? >> i think when you look at population density, you have to very clearly see that those markets have obvious

opportunities, simile based on the fact that sharing economy meets supply and demand. and ideally, very high population cities. india,e cities, china, are areas where i think the cutting edge of the sharing economy is clearly looking to grow. that said, those nuances for those cities and countries are very different than the u.s. >> ranking member is recognized. >> i like to ask a follow-up. when you mentioned health care and taxes, related to london, or just the country, and why? >> is related to other countries. specifically in london, forgive me, i am not an expert in u.k. or -- and i am not a lawyer. but i knowingly look at our marketplace in london, even our services, what we call our mix,

is different. our number one service in london is handyman services. which is a different number one service them say we have in los angeles or san francisco. and part of that is based on one, the city dynamic. two, those that are available and willing and wanting to work in that capacity. a lot of that happens to do with health care, and availability of it. it also happens to do with general sort of city service behavior. we see lots of nuances between the cities, which is why we look to deploying globally, those are very cautious and careful decisions need to work in partnership with federal and state or country governments to do so, with always the benefit and the welfare of our taskers in mind. >> thank you. enclosing, i would just comment that we heard a lot of evidence here regarding the current tax law and outdated irs policies,

that are ill-suited to the burgeoning sharing economy and the companies and workers who are directly participating. it seems clear that we need to figure this out, and adjust accordingly. i am pleased that our distinguished plan will has undertaking the task in researching and identifying many of the challenges presented, as well as suggesting possible solutions. the rise of the sharing economy is a very exciting development. and we need to ensure that our outmoded legal system does not strangle this new engine for growth in its infancy. we look forward to working with all of you, to modernize our system, to boost the economy, and increase employment opportunities for many americans. and i were asked unanimous consent that the members have five legislative days to submit to the record, without objection, so ordered. there is no further business for the community, we are adjourned. thank you.

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discussion. >> tsa administrator peter never enter testifies wednesday on the recent surge in wait times for screening u.s. air passengers. see his testimony before the house homeland security committee, live at 10 a.m. eastern on c-span3. >> in addition to the graduating classes all over god's planet, i wish you were graduating into a world of peace, light, and love. but that is not the case. we do not live in a fairytale. but i guess the wor 1% does. >> watch commencements speeches in entirety, from business leaders at pepperdine university, founder of oracle larry ellison at the university of southern california, and

maria contreras, administrator of the small business administration at whittier college. >> you can tell on yourself what makes you special? what distinguishes you from others? in business, we calling your unique value proposition. figuring out yours, is key. >> senator jeff sessions at the end of verse the of alabama, and senator boxer, and governor mike pence at indiana wesleyan university. >> to be strong or courageous, and learn to stand for who you are and what you believe. it is a way that you have changed here. and will carry into the balance of your life. >> and white house officials, vice president joe biden at notre dame, attorney general loretta lynch at spelman college, and president barack obama at rutgers. wonderbama: is it any

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george: it is about $37.5 what is iny close to the senate bill. you write about what is in the bill in terms of the environment. what will we see in terms of the amendments? >> the real fights will be less overspending. more over provisions that republicans added. rolling back some of the environment and energy policies supported by the obama administration. in some cases, they