SECTION 1. PURPOSE

The purpose of this revenue procedure is to establish the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program offered by the Internal Revenue Service (IRS) to employers in the service industry (excluding gaming industry employers). The SITCA program will replace the Tip Reporting Alternative Commitment (TRAC) program and the Tip Rate Determination Agreement (TRDA) program, as provided in Announcement 2001-1, 20012 I.R.B. 277, and the Employer-Designed Tip Reporting Program (EmTRAC), as provided in Notice 2001-1, 2001-2 I.R.B. 261. Upon termination of the TRAC, TRDA, and EmTRAC programs, this revenue procedure provides that a transition period will apply to employers with existing tip reporting agreements and their

employees. For such employers, the existing agreements will end upon the earliest of (1) the employer’s acceptance into the SITCA program, (2) an IRS determination that the employer is noncompliant with the terms of the TRAC, TRDA, or EmTRAC agreement, or (3) the end of the first calendar year beginning after the date on which the final revenue procedure is published in the Internal Revenue Bulletin.

The SITCA program is part of the Tip Rate Determination/Education Program implemented by the National Tip Reporting Compliance Program (NTRCP). NTRCP is part of the Small Business/ Self-Employed Division of the IRS. The SITCA program is designed to promote voluntary compliance by employers and employees with the provisions of the Internal Revenue Code (Code) related to the Federal taxation of tips, promote accurate tip reporting, and reduce disputes under

section 3121(q) of the Code while reducing taxpayer burden. Additionally, the SITCA program is intended to facilitate and promote the use of current financial information technology in the tip reporting process.