HB1314, the Tipped Income Protection and Support Act or “TIPS Act,” would eliminate the federal subminimum wage for tipped employees under the Fair Labor Standards Act. Under the bill, tipped workers would have to be paid at least the regular federal minimum wage, while keeping all tips they receive, subject to existing tip-pooling arrangements among workers who customarily and regularly receive tips. The bill also revises federal enforcement language so that penalties for unlawful tip practices are based on tips unlawfully used or kept by an employer.
The bill further creates a new federal income tax deduction for cash tips received in traditionally tipped occupations. The deduction would apply to qualified tips reported to the employer, would be available to both itemizers and non-itemizers, and would not be subject to certain itemized-deduction limits. It would phase in for taxable years beginning after December 31, 2025, and the Treasury Department would be required to adjust withholding tables and procedures to account for the new deduction. The deduction is limited to individuals with adjusted gross income of $112,500 or less and applies only to tips from unrelated parties in occupations that customarily receive tips, including cosmetology, hospitality, food and beverage service, parking attendants, and custodial service.
If enacted, the bill would amend the Fair Labor Standards Act to end the federal tip credit and require employers to pay tipped employees the full federal minimum wage before tips. It would also amend the Internal Revenue Code to add a new deduction for cash tips, affecting tax treatment for workers in tipped occupations and requiring Treasury to update withholding guidance. The bill would directly affect employers in the hospitality and service sectors, tipped workers, payroll systems, and federal wage-and-hour enforcement.
Based on the bill text and available context, the measure appears to be framed positively toward tipped workers, emphasizing wage protection, retention of tips, and tax relief. No committee transcript or vote record is available here, so there is no documented recorded opposition or support in the provided materials. The introduction by multiple House members suggests a coalition effort, but the legislative history provided does not show committee action beyond referral.
The main policy contention is the elimination of the separate tipped minimum wage, which would raise labor costs for employers who currently use the tip credit and could alter compensation structures in restaurants, hospitality, and other tipped industries. Another potential point of debate is the new tax deduction: while it benefits many tipped workers, it is limited by income, applies only to reported cash tips from unrelated parties, and excludes workers with ownership stakes, which may raise questions about fairness, administrability, and coverage. The bill’s scope also invites scrutiny over whether tip pooling, wage compliance, and tax withholding changes would be easy to implement in practice.