The American Institute of CPAs plans to support a new tax simplification bill introduced earlier this month by a pair of congressmen that would make it easier to satisfy the tax-reporting requirements of workers who are employed in multiple jurisdictions.

The Mobile Workforce State Income Tax Simplification Act of 2011, introduced by Rep. Howard Coble, R-N.C., and Hank Johnson, D-Ga., would provide a threshold of 30 days a year for a state to be able to tax a nonresident employee’s income, and withhold taxes from the employee’s wages.

Once the person was employed for more than 30 days, the state would be able to tax the employee’s income and withhold taxes from the employee’s wages. Professional athletes and entertainers, and some public figures, would be excluded from the legislation.
The bill was previously introduced three times in earlier congressional sessions going back to 2006. Johnson re-introduced it the last time, and it has now gained the support of Coble, who chairs the House Judiciary Subcommittee on Courts, Commercial and Administrative Law, of which Johnson is a member.

“This legislation provides for a uniform, fair and easily administered law and would ensure that the correct amount of tax is withheld and paid to the states without the undue burden that the current system places on employees and employers,” Coble said in a statement.  “Consistent with current law, the bill provides that an employee’s earnings are subject to full tax in his/her state of residence. In addition, under the legislation, an employee’s earnings would be subject to tax in the state(s) within which the employee is present and performing employment duties for more than 30 days during the calendar year.”

Johnson added, “This not only simplifies the system, but makes it fair for people who work in multiple jurisdictions.”

They pointed out that states currently have widely varying and inconsistent standards regarding the requirements for employees to file personal income tax returns when traveling to a nonresident state for temporary work periods and for employers to withhold income tax on employees who travel outside of their state of residence for temporary work periods.

Employees who travel outside of their state of residence for business purposes are subject to onerous administrative burdens because, in addition to filing federal and resident state income tax returns, they may also be legally required to file an income tax return in every other state into which they traveled, even if they were there for only one day. Employers are required to incur extraordinary expenses in their efforts to comply with the states’ widely divergent withholding requirements for employees’ travel to nonresident states for temporary work periods. 

The AICPA, in a briefing paper provided ahead of its Spring Council meeting next week in Washington, D.C., said it was anticipating that the legislation would be re-introduced in Congress this session, although it was not expecting the bill to be introduced until late this summer. AICPA members plan to travel to their congressional representatives’ offices during the Spring Council conference and hope to convince lawmakers to support the bill, along with other legislative priorities such as proposals to modify tax return due dates, tax strategy patents, and overall tax simplification.

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