Mobile Workforce Tax Simplification Bill Reintroduced

Worldwide ERC® continues to work on passage of legislation to limit states’ taxation of non-resident workers.

 A bill to limit state taxation of non-resident workers to those who have performed services in the state for more than 30 days during the year has again been introduced in the U.S. House of Representatives. H.R. 5674 was introduced by Representative Johnson (D-Ga), with 11 cosponsors, on 24 January 2020.

Passage by the House

The House passed previous versions of the bill, which is a legislative priority for Worldwide ERC®, in 2011, 2015, and 2017. It would eliminate a problem created by each state imposing its own rules affecting if and when out-of-state workers’ income becomes taxable. Worldwide ERC® continues to support the legislation and made it a focus of its member visits to Capitol Hill on 2 October 2019. The legislation is bipartisan, with numerous sponsors from both parties.

The new legislation is likely to pass the House once again. Worldwide ERC® will continue to work to achieve passage in the Senate.

Senate Considerations

A new version has not yet been introduced in the Senate. Last year’s Senate bill, S. 604, attracted some 36 cosponsors, and the prior year version, S. 540, attracted more than 50. However, assuming a new Senate bill is introduced, success in the Senate is once again uncertain. The legislation is opposed by the powerful New York delegation in the House and Senate because it would cost New York millions in lost taxes. Senate Minority Leader Schumer (NY) has up until now prevented the legislation from achieving a vote of the full senate. However, the legislation has the backing of a coalition of large corporations, which will continue to work for its passage.

Problem for Employers

The proposed legislation solves a longstanding problem for companies with workers who occasionally work in states other than their state of residence. Such workers are subject to tax in those states where they work temporarily, and the employer may be subject to withholding of that state’s income tax, but there is no uniform standard as to when such taxation or withholding begins.

Worldwide ERC® member companies struggle to apply these disparate rules, and spend a great deal of time and effort to do so. Indeed, the effort for a company with many workers traveling on the job can be so onerous that a few simply adopt a general rule and apply it to all states without regard to the specific state rule. And in any event, companies must register and manage a withholding account in every state in which its workers visit even if it has no office or company facility there. Industries severely impacted include retail, manufacturing, technology, services, and consulting.

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How This Impacts Mobility

Worldwide ERC® members currently operate in a confusing environment that requires a state-by-state determination as tog when taxation and withholding should begin. The Mobile Workforce State Income Tax Simplification Act would resolve that problem in a very favorable way.