Sponsor
Steven Horsford
Representative · D-NV
The bill raises guaranteed pay and tax benefits for many tipped workers and improves tax administration, but shifts higher labor costs onto employers—risking price hikes, reduced hours or hiring—and excludes some workers from the new tax benefit while reducing federal revenues.
Tipped workers (e.g., restaurant, hospitality, cosmetology staff) will receive at least the full federal minimum wage instead of a lower tipped rate, increasing their baseline earnings and pay certainty.
Workers who customarily receive tips can participate in tip pooling, which can more evenly distribute gratuities across service staff and reduce pay variability within teams.
Tipped workers and taxpayers gain a permanent, expanded tip-related tax benefit (including counting automatic gratuities as qualified tips and a higher joint-return limit), increasing after-tax income for many in tipped occupations.
Small businesses (especially restaurants) will face higher labor costs because the tip credit is eliminated, which may lead them to raise prices, reduce hiring or hours, reclassify roles, or change schedules—potentially harming employment and incomes for some tipped workers and increasing consumer costs.
Some taxpayers (including owners or those who share tips with related parties) will be disqualified from the tip deduction, reducing tax benefits for those individuals.
Requiring a TIN (or a spouse's TIN) to claim the deduction could block undocumented workers or other people without TINs from accessing the tax benefit.
Based on analysis of 3 sections of legislative text.
Ends the federal tipped subminimum wage, narrows tip-remedy language, and makes/expands a permanent qualified‑tip tax deduction with stricter rules.
Representative · D-NV
Official title: 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.
Introduced February 13, 2026 by Steven Horsford · Last progress February 13, 2026
Requires that tipped workers be paid the full federal minimum wage (ending a lower tipped minimum), narrows statutory language about employer misuse of tips, and makes the federal qualified-tip tax deduction permanent while increasing the joint-return cap, adding documentation and anti‑abuse rules, and expanding covered automatic gratuities for certain service workers. The bill changes both wage-law treatment of tips and the federal tax treatment of tip income and qualifying gratuities, with tax provisions applying to taxable years after December 31, 2025.