Moments ago, the United States House of Representatives (House)
passed the Mobile Workforce State Income Tax Simplification Act of
2015 (H.R. 2315)
Mobile Workforce State Income Tax Simplification Act of 2015 (H.R.
2315) by voice vote. The Act will now be delivered to
the United States Senate (Senate) for introduction and referral to
committee for consideration. While the Senate Committee on Finance
has not advanced a companion bill (S. 386) introduced by Senators
John Thune (R-SD) and Sherrod Brown (D-OH) in February 2015, the
bill currently touts 45 co-sponsors.
The Mobile Workforce Act that passed today was introduced in May
2015 by Representatives Mike Bishop (R-MI) and Hank Johnson (D-GA).
As highlighted in our prior coverage, the bill
advanced out of the House Judiciary Committee in June
2015 by a vote 23-4. This legislation has been
introduced in the House by each Congress since it was first
introduced in 2006 by the 109th. While the legislation has seen
some degree of success in the House, it has yet to advance beyond
the Senate Committee on Finance. Notably, in May 2012, a prior
version of the Act was passed in the House, but the Senate
Committee on Finance did not take it up for consideration.
The Mobile Workforce Act
While the Mobile Workforce Act has been tweaked over the years,
its underlying objective has largely remained the same—to
providing a workable, national framework for the administration of,
and compliance with, the states' incongruent withholding and
nonresident income tax payment laws. The version of the Act passed
by the House today establishes a thirty-day safe harbor for
traveling employees from nonresident state personal income taxes,
and greatly reduces and simplifies the withholding and reporting
burdens and related costs to their employers. Specifically, an
employee working in a nonresident state for thirty or fewer days
would not pay personal income tax to the nonresident state.
Instead, the employee would remain fully taxable in its resident
state on these earnings.
Under the Act, employers would not be required to withhold taxes
in the nonresident state for employees whose travel falls at or
below the thirty-day threshold in the state. In making this
determination, the Act allows employers to rely on an
employee's annual determination of the time they will spend
working in a state, absent fraud or collusion by the employee. The
definition of "employee" has the same meaning given to it
by the state in which the employment duties are performed, subject
to only a few exceptions (including professional athletes,
professional entertainers, and public figures who are persons of
prominence who perform services for wages or other remuneration on
a per-event basis).
As passed today, the "Act shall take effect on January 1 of
the [second] year that begins after the date of the enactment of
this Act" and retroactive application is expressly prohibited.
Practically speaking, this means that the absolute earliest the Act
could take effect is January 1, 2018 (assuming the Senate passes
and President approves the Act this year), and would apply to tax
obligations that accrue beginning then.
If recent history is any indication, the outlook in the Senate
remains somewhat bleak. Looking at the glass half full, the Senate
companion bill does enjoys 45 co-sponsors this time around—a
figure that has been much less in the past. With elections and a
lame-duck session right around the corner, it will be interesting
to see if the Senate has an appetite to advance the Act this
The two other state tax bills advanced by the House Judiciary
Committee last summer (i.e., the Digital Goods and
Services Tax Fairness Act of 2015 and the Business Activity Tax
Simplification Act of 2015) were not included on this week's
House suspension calendar for consideration.
More significantly in the eyes of many, the House Judiciary
Committee has yet to formally consider one of the widely discussed
online sales tax bills. This inaction comes amidst legislative and
judicial turmoil as states continue to challenge the continued
viability of the Quill physical presence standard.
The situation is only expected to get worse, as we understand
several states are preparing to introduce South Dakota-style
legislation (i.e., similar to S.B. 106) during their
upcoming 2017 legislative sessions. As more states follow the lead
of aggressive states likes South Dakota and Alabama, the
desperation for a Congressional solution will continue to increase.
While we applaud the passage of the Mobile Workforce Act, Congress
continues to leave the most important issue on the table.
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