section 6053 (a) to which paragraph (16) (B) of section 3401(a) is applicable may deduct and withhold the tax with respect to such tips from any wages of the employee (excluding tips) under his control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his employment by such employer is less than $20. Such tax shall not at any time be deducted and withheld in an amount which exceeds the aggregate of such wages and funds minus any tax required by section 3102(a) to be collected from such wages."

(e) (1) Section 6051(a) of such Code (relating to receipts for employees) is amended by adding at the end thereof the following new sentence: "In the case of tips received by an employee in the course of his employment, the amounts required to be shown by paragraph (3) shall include only such tips as are included in statements furnished to the employer pursuant to section 6053(a); and the amounts required to be shown by paragraph (5) shall include only such tips as are reported by the employee to the employer pursuant to section 6053(b)." (2)(A) Subpart C of part III of subchapter A of chapter 61 of such Code (relating to information regarding wages paid employees) is amended by adding at the end thereof the following new section:

"SEC. 6053. REPORTING OF TIPS.

"(a) Every employee who, in the course of his employment by an employer receives in any calendar month tips which are wages (as defined in section 3121 (a) or section 3401(a)) shall report all such tips in one or more written statements furnished to his employer on or before the 10th day following such month. Such statements shall be furnished by the employee under such regulations, at such other times before such 10th day, and in such form and manner, as may be prescribed by the Secretary or his delegate.

"(b) For purposes of sections 3102(c), 3111, 6051 (a), and 6652(c), tips received in any calendar month shall be considered reported pursuant to this section only if they are included in such a statement furnished to the employer on or before the 10th day following such month and only to the extent that the tax imposed with respect to such tips by section 3101 can be collected by the employer under section 3102."

(B) The table of sections for such subpart C is amended by adding at the end thereof the following:

"Sec. 6053. Reporting of tips."

(3) Section 6652 of such Code (relating to failure to file certain information returns) is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

"(c) FAILURE TO REPORT TIPS.-In the case of tips to which section 6053 (a) applies, if the employee fails to report any of such tips to the employer pursuant to section 6053 (b), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be paid by the employee, in addition to the tax imposed by section 3101 with respect to the amount of the tips which he so failed to report, an amount equal to such tax."

(f) Section 3111 of such Code (relating to rate of tax on employers under the Federal Insurance Contributions Act), as amended by section 321 of this Act, is amended by adding at the end thereof the following new subsection:

"(c) TIPS.-In the case of tips which constitutes wages, the tax imposed by this section shall be applicable only to such tips as are reported by the employee to the taxpayer pursuant to section 6053 (b).”

(g) The amendments made by this section shall apply only with respect to tips received by employees after 1965.

INCLUSION OF ALASKA AND KENTUCKY AMONG STATES PERMITTED TO DIVIDE

THEIR RETIREMENT SYSTEMS

SEC. 314. The first sentence of section 218(d) (6) (C) of the Social Security Act is amended

(1) by inserting "Alaska," before "California"; and
(2) by inserting "Kentucky," before "Massachusetts".

ADDITIONAL PERIOD FOR ELECTING COVERAGE UNDER DIVIDED RETIREMENT

SYSTEM

SEC. 315. The first sentence of section 218(d) (6) (F) of the Social Security Act is amended by striking out "1963" and inserting in lieu thereof "1967".

EMPLOYEES OF NONPROFIT ORGANIZATIONS

SEC. 316. (a) (1) Section 3121(k) (1) (B) (iii) of the Internal Revenue Code of 1954 (relating to effective date of exemption of religious, charitable, and certain other organizations) is amended to read as follows:

"(iii) the first day of any calendar quarter preceding the calendar quarter in which the certificate is filed, except that such date may not be earlier than the first day of the twentieth calendar quarter preceding the quarter in which such certificate is filed."

(2) The amendment made by paragraph (1) shall apply in the case of any certificate filed under section 3121 (k) (1) (A) of such Code after the date of the enactment of this Act.

(b) Section 3121(k)(1) of such Code (relating to waiver of exemption by religious, charitable, and certain other organizations) is further amended by adding at the end thereof the following new subparagraph:

"(H) An organization which files a certificate under subparagraph (A) before 1966 may amend such certificate during 1965 or 1966 to make the certificate effective with the first day of any calendar quarter preceding the quarter for which such certificate originally became effective, except that such date may not be earlier than the first day of the twentieth calendar quarter preceding the quarter in which such certificate is so amended."

(c) (1) Section 105(b) of the Social Security Amendments of 1960 is amended to read as follows:

“(b) (1) If—

"(A) an individual performed service in the employ of an organization with respect to which remuneration was paid before the first day of the calendar quarter in which the organization filed a waiver certificate pursuant to section 3121 (k) (1) of the Internal Revenue Code of 1954, and such service is excepted from employment under section 210(a) (8) (B) of the Social Security Act,

"(B) such service would have constituted employment as defined in section 210 of such Act if the requirements of section 3121(k) (1) of such Code were satisfied,

"(C) such organization paid, on or before the due date of the tax return for the calendar quarter before the calendar quarter in which the organization filed a certificate pursuant to section 3121(k)(1) of such Code, any amount, as taxes imposed by sections 3101 and 3111 of such Code, with respect to such remuneration paid by the organization to the individual for such service,

"(D) such individual, or a fiduciary acting for such individual or his estate, or his survivor (within the meaning of section 205(c) (1) (C) of such Act), requests that such remuneration be deemed to constitute remuneration for employment for purposes of title II of such Act, and "(E) the request is made in such form and manner, and with such official, as may be prescribed by regulations made by the Secretary of Health, Education, and Welfare,

then, subject to the conditions stated in paragraphs (2), (3), (4), and (5), the remuneration with respect to which the amount has been paid as taxes shall be deemed to constitute remuneration for employment for purposes of title II of such Act.

"(2) Paragraph (1) shall not apply with respect to an individual unless the organization referred to in paragraph (1) (A), on or before the date on which the request described in paragraph (1) is made, has filed a certificate pursuant to section 3121(k) (1) of such Code.

"(3) Paragraph (1) shall not apply with respect to an individual who is employed by the organization referred to in paragraph (2) on the date the certificate is filed.

"(4) If credit or refund of any portion of the amount referred to in paragraph (1) (C) (other than a credit or refund which would be allowed if the service constituted employment for purposes of chapter 21 of such Code) has been obtained, paragraph (1) shall not apply with respect to the individual unless the amount credited or refunded (including any interest under section 6611 of such Code) is repaid before January 1, 1968, or, if later, the first day of the third year after the year in which the organization filed a certificate pursuant to section 3121 (k) (1) of such Code.

"(5) Paragraph (1) shall not apply to any service performed for the organization in a period for which a certificate filed pursuant to section 3121 (k) (1) of such Code is not in effect."

(2) The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act. The provisions of section 105 (b) of the Social Security Amendments of 1960 which were ineffect before the date of the enactment of this Act shall be applicable with respect to any request filed under section 105 (b)(1) of such Amendments before such date. Nothing in the preceding sentence shall prevent the filing of a request under section 105 (b) (1) of such Amendments as amended by this Act.

COVERAGE OF TEMPORARY EMPLOYEES OF THE DISTRICT OF COLUMBIA

SEC. 317. (a) Section 210(a) (7) of the Social Security Act is amended(1) by striking out "or" at the end of subparagraph (B),

(2) by striking out the semicolon at the end of subparagraph (C) (ii) and inserting in lieu thereof ", or", and

(3) by adding after subparagraph (C) the following new subparagraph: "(D) service performed in the employ of the District of Columbia or any instrumentality which is wholly owned thereby, if such service is not covered by a retirement system established by a law of the United States; except that the provisions of this subparagraph shall not be applicable to service performed―

"(i) in a hospital or penal institution by a patient or inmate thereof; "(ii) by any individual as an employee included under section 2 of the Act of August 4, 1947 (relating to certain interns, student nurses, and other student employees of hospitals of the District of Columbia Government; 5 U.S.C. 1052), other than as a medical or dental intern or as a medical or dental resident in training;

"(iii) by any individual as an employee serving on a temporary basis in case of fire, storm, snow, earthquake, flood, or other similar emergency; or

"(iv) by a member of a board, committee, or council of the District of Columbia, paid on a per diem, meeting, or other fee basis;". (b) Section 3121(b) (7) of the Internal Revenue Code of 1954 (relating to certain services not included in definition of employment) is amended

(1) by striking out "or" at the end of subparagraph (A),

(2) by striking out the semicolon at the end of subparagraph (B) and inserting in lieu thereof ", or", and

(3) by adding after subparagraph (B) the following new subparagraph: "(C) service performed in the employ of the District of Columbia or any instrumentality which is wholly owned thereby, if such service is not covered by a retirement system established by a law of the United States; except that the provisions of this subparagraph shall not be applicable to service performed

"(i) in a hospital or penal institution by a patient or inmate thereof; "(ii) by any individual as an employee included under section 2 of the Act of August 4, 1947 (relating to certain interns, student nurses, and other student employees of hospitals of the District of Columbia Government; 5 U.S.C. 1052), other than as a medical or dental intern or as a medical or dental resident in training;

“(iii) by any individual as an employee serving on a temporary basis in case of fire, storm, snow, earthquake, flood or other similar emergency;

or

"(iv) by a member of a board, committee, or council of the District of Columbia, paid on a per diem meeting, or other fee basis;".

(c) (1) Section 3125 of such Code (relating to returns in the case of governmental employees in Guam and American Samoa) is amended by adding at the end thereof the following new subsection:

"(c) DISTRICT OF COLUMBIA. In the case of the taxes imposed by this chapter with respect to service performed in the employ of the District of Columbia or in the employ of any instrumentality which is wholly owned thereby, the return and payment of the taxes may be made by the Commissioners of the District of Columbia or by such agents as they may designate. The person making such return may, for convenience of administration, effective with respect to remuneration paid before 1971, make payments of the tax imposed by section 3111 with

respect to such service without regard to the $5,600 limitation in section 3121(a)(1) and, effective with respect to remuneration paid after 1970, without regard to the $6,600 limitation in such section 3121 (a) (1).”

(2) The heading of such section 3125 is amended by striking out "AND AMERICAN SAMOA" and inserting in lieu thereof ", AMERICAN SAMOA, AND THE DISTRICT OF COLUMBIA".

(3) The table of sections for subchapter C of chapter 21 of such Code (relating to general provisions for Federal Insurance Contributions Act) is amended by striking out

"Sec. 3125. Returns in the case of governmental employees in Guam and American Samoa." and inserting in lieu thereof

"Sec. 3125. Returns in the case of governmental employees in Guam, American Samoa, and the District of Columbia."

(d) Section 6205 (a) of such Code (relating to adjustment of tax) is amended by adding at the end thereof the following new paragraph:

"(4) DISTRICT OF COLUMBIA AS EMPLOYER.-For purposes of this subsection, in the case of remuneration received during any calendar year from the District of Columbia or any instrumentality which is wholly owned thereby, the Commissioners of the District of Columbia and each agent designated by them who makes a return pursuant to section 3125 shall be deemed a separate employer."

(e) Section 6413 (a) of such Code (relating to adjustment of certain employment taxes) is amended by adding at the end thereof the following paragraph:

"(4) DISTRICT OF COLUMBIA AS EMPLOYER.-For purposes of this subsection, in the case of remuneration received during any calendar year from the District of Columbia or any instrumentality which is wholly owned thereby, the Commissioners of the District of Columbia and each agent designated by them who makes a return pursuant to section 3125 shall be deemed a separate employer."

(f) (1) Section 6413(c) (2) of such Code (relating to applicability of special refunds to certain employment taxes) is amended by adding at the end thereof the following new subparagraph:

(F) GOVERNMENTAL EMPLOYEES IN THE DISTRICT OF COLUMBIA.—In the case of remuneration received from the District of Columbia or any instrumentality wholly owned thereby, during any calendar year, the Commissioners of the District of Columbia and each agent designated by them who makes a return pursuant to section 3125 (c) shall, for purposes of this subsection, be deemed a separate employer."

(2) The heading of such section 6413 (c) (2) is amended by striking out "AND AMERICAN SAMOA" and inserting in lieu thereof ", AMERICAN SAMOA, AND THE DISTRICT OF COLUMBIA".

(g) The amendments made by this section shall apply with respect to service performed after the calendar quarter in which this section is enacted and after the calendar quarter in which the Secretary of the Treasury receives a certification from the Commissioners of the District of Columbia expressing their desire to have the insurance system established by title II (and part A of title XVIII) of the Social Security Act extended to the officers and employees coming under the provisions of such amendments.

COVERAGE FOR CERTAIN ADDITIONAL HOSPITAL EMPLOYEES IN CALIFORNIA

SEC. 318. Section 102 (k) of the Social Security Amendments of 1960 is amended by inserting "(1)" immediately after “(k)", and by adding at the end thereof the following new paragraph:

"(2) Such agreement, as modified pursuant to paragraph (1), may at the option of such State be further modified, at any time prior to the seventh month after the month in which this paragraph is enacted, so as to apply to services performed by any hospital affected by such earlier modification by any individual who after December 31, 1959, is or was employed by such State (or any political subdivision thereof) in any position described in paragraph (1). Such modification shall be effective with respect to (A) all services performed by such individual in any such position on or after January 1, 1962, and (B) all such services, performed before such date, with respect to which amounts equivalent to the sum of the taxes which would have been imposed by sections 3101 and 3111 of the Internal Revenue Code of 1954 if such services had constituted employment for purposes of chapter 21 of such Code at the time they were performed have, prior to the date of the enactment of this paragraph, been paid."

TAX EXEMPTION FOR RELIGIOUS GROUPS OPPOSED TO INSURANCE

SEC. 319. (a) Subsection (c) of section 1402 of the Internal Revenue Code of 1954 is amended by striking out "or" at the end of paragraph (4), by striking out the period at the end of paragraph (5) and inserting in lieu thereof "; or", and by adding after paragraph (5) the following new paragraph:

"(6) the performance of service by an individual during the period for which an exemption under subsection (h) is effective with respect to him." (b) Subsection (c) of section 211 of the Social Security Act is amended by striking out "or" at the end of paragraph (4), by striking out the period at the end of paragraph (5) and inserting in lieu thereof "; or", and by adding after paragraph (5) the following new paragraph:

"(6) The performance of service by an individual during the period for which an exemption under section 1402 (h) of the Internal Revenue Code of 1954 is effective with respect to him."

(c) Section 1402 of the Internal Revenue Code of 1954 is further amended by adding at the end thereof the following new subsection : "(h) MEMBERS OF CERTAIN RELIGIOUS FAITHS.

"(1) EXEMPTION.-Any individual may file an application (in such form and manner, and with such official, as may be prescribed by regulations under this chapter) for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect or division thereof and is an adherent of established tenets or teachings of such sect or division by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by

"(A) such evidence of such individual's membership in, and adherence to the tenets or teachings of, the sect or division thereof as the Secretary or his delegate may require for purposes of determining such individual's compliance with the preceding sentence, and

"(B) his waiver of all benefits and other payments under titles II and XVIII of the Social Security Act on the basis of his wages and self-employment income as well as all such benefits and other payments to him on the basis of the wages and self-employment income of any other person,

and only if the Secretary of Health, Education, and Welfare finds that"(C) such sect or division thereof has the established tenets or teachings referred to in the preceding sentence,

"(C) such sect or division thereof has the established tenets or teachings referred to in the preceding sentence,

"(D) it is the practice, and has been for a period of time which he deems to be substantial, for members of such sect or division thereof to make provision for their dependent members which in his judgment is reasonable in view of their general level of living, and

"(E) such sect or division thereof has been in existence at all times since December 31, 1950.

An exemption may not be granted to any individual if any benefit or other payment referred to in subparagraph (B) became payable (or, but for section 203 or 222 (b) of the Social Security Act, would have become payable) at or before the time of the filing of such waiver.

"(2) TIME FOR FILING APPLICATION.-For purposes of this subsection, an application must be filed

"(A) In the case of an individual who has self-employment income (determined without regard to this subsection and subsection (c) (6)) for any taxable year ending before December 31, 1965, on or before April 15, 1966, and

"(B) In any other case, on or before the time prescribed for filing the return (including any extension thereof) for the first taxable year ending on or after December 31, 1965, for which he has self-employment income (as so determined).

"(3) PERIOD FOR WHICH EXEMPTION EFFECTIVE.-An exemption granted to any individual pursuant to this subsection shall apply with respect to all taxable years beginning after December 31, 1950, except that such exemption shall not apply for any taxable year-