By Jason Bramwell
A bipartisan bill introduced in the Senate on November 5 that would simplify and standardize state income tax collection for employees who travel across state lines for temporary work assignments has received support from more than 250 organizations and business groups, including the American Institute of CPAs (AICPA).
The legislation, Mobile Workforce State Income Tax Simplification Act (S. 1645), which was introduced by US senators Sherrod Brown (D-OH) and John Thune (R-SD), would also help employers that have to file withholdings and reporting requirements. According to the two lawmakers, there are forty-one different state income tax reporting requirements, which employees and employers currently face, that vary based on length of stay, income earned, or both.
While some states require 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 thirty-day threshold to help ensure that an equitable tax is paid to the state and local jurisdiction where the work is being performed.
"Employees traveling to a nonresident state for fewer than thirty days would have no tax liability in the nonresident state, and the employer would have no withholding obligation", the Council of State Taxation, a nonprofit trade association that engages in interstate and international business, which supports the bill, explained on its website.
Thune said in a written statement that employees and employers should not be burdened with complex tax reporting requirements because jobs in the modern economy involve work in multiple states.
"Our legislation would establish a clear, thirty-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", he added. "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 legislation cosponsored by Brown and Thune is a companion bill to HR 1129, which was introduced in the House of Representatives in March by US Representative Howard Cole (R-NC). The bill was referred to the House Judiciary Committee in March, which then referred it to the Subcommittee on Regulatory Reform, Commercial, and Antitrust Law.
In a statement written on November 6 in support of the Senate bill, AICPA President and CEO Barry Melancon, CPA, CGMA, said",By establishing a thirty-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 and John Thune for their leadership on the issue", Melancon continued. "We are encouraged by the bipartisan show of support for this common-sense response to the taxation confusion experienced by mobile workers and their employees."