A bipartisan bill has been introduced in the Senate with the goal of simplifying income tax collections for taxpayers who work in multiple states.
Senators Sherrod Brown, D-Ohio, and John Thune, R-S.D., led a bipartisan group of senators Tuesday to introduce the Mobile Workforce State Income Tax Simplification Act, legislation that would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments.
While some states require state income tax filing for as little as one day of work in the state, the Mobile Workforce State Income Tax Simplification Act would establish a 30-day threshold to help ensure that an equitable tax is paid to the state and local jurisdiction where the work is being performed while alleviating employees and employers from burdensome tax requirements.
“This common-sense legislation will help simplify and standardize tax filing for employees and employers that conduct business in multiple states,” Brown said in a statement. “This is a great example of government working to reduce burdensome and confusing barriers to help ease the cost of doing business for employers and their workers.”
The bill would also help employers who must file withholdings and reporting requirements. Currently, individuals and employers face up to 41 different state income tax reporting requirements that vary based on length of stay, income earned, or both.
“Employees and employers shouldn’t be burdened with complex tax reporting requirements because jobs in the modern economy involve work in multiple states,” said Thune. “Our legislation would establish a clear 30-day threshold test for state income tax purposes, preventing individuals from having to sort through the complicated tax reporting burdens from the multiple states where they travel for work. This legislation will greatly simplify state income tax filings, is fairer to those residents in states without an income tax, and should help to encourage tax compliance.”
The American Institute of CPAs has made the bill one of its legislative priorities this year, and a companion bill has also been introduced in the House. AICPA president and CEO Barry C. Melancon hailed the introduction of the bill in the Senate.
“This bipartisan measure will simplify and standardize state income tax collection for the many Americans whose work temporarily takes them across state lines,” Melancon said in a statement Wednesday. “By establishing a 30-day threshold for tax liability, the measure—like its companion legislation in the House of Representatives—strikes a balance between interests of the states in taxing work done within their borders and the needs of businesses to be able to operate efficiently. It will ensure that the primary place(s) of business for an employee are where that employee pays state income taxes. The AICPA commends Senators Sherrod Brown, D-Ohio, and John Thune, R-S.D., for their leadership on the issue. We are encouraged by the bipartisan show of support for this common-sense response to the taxation confusion experienced by mobile workers and their employers.”
In addition to the AICPA, the Mobile Workforce State Income Tax Simplification Act is supported by over 250 organizations and business groups. “Retailers welcome the introduction of this bill,” National Retail Federation vice president and tax counsel Rachelle Bernstein said. “The current morass of state laws dealing with state income tax burdens for workers on business travel outside their home states creates confusion and undue compliance burdens for both employees and employers. This burden can be particularly onerous for the retail industry. Buyers for both large and small retailers frequently travel out of state to visit vendors or attend trade or fashion shows. Federal law to provide uniform rules for when these employees must file income tax returns in another state would greatly simplify this burden.”
The Council on State Taxation, a nonprofit trade association that engages in interstate and international business, lists the Mobile Workforce State Income Tax Simplification Act as its number one federal legislative priority. This legislation is also supported by the American Council of Life Insurers, the Financial Services Roundtable, the Motion Picture Association of America, the National Association of Manufacturers, the National Retail Federation, and the U.S. Chamber of Commerce. A complete list of supporting organizations can be found here.