Sponsors
The bill raises guaranteed pay and tax benefits for many tipped workers and improves tax administration, but shifts labor costs onto employers/consumers, risks reduced hours or reclassification for workers, restricts eligibility for some individuals (including undocumented workers), and reduces federal revenue.
Tipped workers in hospitality, food/beverage, cosmetology and similar industries will receive higher, more certain take-home pay because the bill eliminates the lower federal tipped minimum (no tip credit) and makes permanent an expanded tax deduction (including treating automatic gratuities as qualified tips and raising the joint-return limit).
Service employees who customarily receive tips will be able to pool tips among eligible workers, enabling more even distribution of gratuities across front‑of‑house staff.
Requiring a taxpayer identification number (TIN) on returns claiming the deduction should reduce improper claims and improve tax administration transparency and enforcement.
Small employers (especially restaurants) and consumers are likely to face higher costs because employers can no longer take a tip credit, which may lead employers to raise prices, cut hiring, reduce worker hours, or reclassify roles (with potential negative effects for tipped workers).
The bill's TIN and eligibility requirements (and rules disqualifying those who share tips with related parties or have ownership stakes) will bar some people — including undocumented workers and certain small‑business owners/related-party tip sharers — from claiming the deduction, reducing benefits for those individuals.
Narrowing remedies to cases of 'tips unlawfully used or kept' may limit workers' ability to recover unpaid tips or other wage-related losses and could make enforcement against employer misconduct more difficult.
Based on analysis of 3 sections of legislative text.
Requires employers to pay tipped workers full federal minimum wage, allows tip pooling, narrows tip-remedy language, and makes/expands a qualified-tip tax deduction (tax rules effective after 12/31/2025).
Introduced February 13, 2026 by Steven Horsford · Last progress February 13, 2026
Requires employers to pay tipped workers the full federal minimum wage (ending the separate lower tipped minimum) and allows tip pooling among employees who customarily and regularly receive tips. It narrows the statutory remedy language for unlawfully taken tips. Separately, it makes a federal tax deduction for qualified tips permanent, raises the joint-return limit, tightens documentation and anti‑abuse rules (including a taxpayer identification number requirement), and expands which automatic gratuities qualify for the deduction for certain hospitality, food and beverage, and cosmetology workers. Tax changes apply to taxable years beginning after December 31, 2025.