APA-Supported Mobile Workforce Bill Gets House Hearing by William Dunn, CPP

The Mobile Workforce State Income Tax Simplification Act of 2015 (HR 2315) will be considered by the full House of Representatives after its passage by the House Judiciary Committee on June 17 by a vote of 23-4. Weeks earlier, on June 2, the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law heard testimony on the bill. APA submitted its comments for the record.

The bill, long supported by the APA, would establish a 30-day safe harbor against nonresident state income taxes when employees cross state lines for work. At the June 2 hearing, Douglas Lindholm, President and Executive Director of the Council on State Taxation (COST), explained the burden facing individual taxpayers:

“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 travel, even if they are there for only one day.”

The APA provided the employer’s perspective:

“Due to the extreme complexity of the varying state tax regulations, many companies find complying with the laws nearly impossible. A lack of adequate software systems, personnel, time, money, or other resources are some of the impediments that prevent compliance with the complex laws. Still other companies are simply ignorant of the current legal framework and would be shocked to discover their own lack of compliance.

“It is the duty of payroll professionals to ensure that taxes are withheld properly for the state in which the employee is working as well as the state in which the employee claims residency. It is confounding that there is no consistent guidance on what to do when an employee crosses a border for work. Each state has its own set of tax laws and regulations applicable to nonresident workers. States do not impose these regulations in the same manner, and each pairing of states creates a new requirement.”

Compromise Rejected
Congressmen Jerrold Nadler (D-NY) and Hakeem Jeffries (D-NY) proposed two amendments that would ease the financial impact on New York state. COST estimates that if HR 2315 is enacted states will collect 0.1% less in total state income taxes. However, certain states will feel the impact much more than others. New York is expected to lose far more tax revenue than any other state — in fact, more than all other states combined.

Under the provisions of the original language, certain individuals would not be considered “employees” for purposes of the safe harbor. The exclusion includes professional athletes, entertainers, and certain public figures. The first proposed amendment, presented by Rep. Nadler, would also exclude individuals earning more than $130,000 annually. Such high earners, Nadler said, should not be provided such a loophole with which to shield their income.

Jeffries proposed that the act not apply to any state that would lose more than $25 million in nonresident tax revenue due to the safe harbor. According to the numbers provided by COST, New York would be the only state qualifying for that exclusion.

Rep. John Conyers (D-MI) supported both amendments and suggested to the committee that without the amendments the bill might face stiff opposition in the Senate from Sens. Charles Schumer (D-NY) and Kirsten Gillibrand (D-NY).

Both amendments were rejected. Opposing the first amendment, committee chair Rep. Bob Goodlatte (R-VA) said that setting dollar thresholds proves too difficult to administer, which corresponds with the positions of both COST and APA. Rep. Louis Gohmert (R-TX) opposed the second amendment on the grounds that the $25 million threshold might encourage states to increase their estimates of lost taxes in order to qualify for the exclusion.

HR 2315 now goes to the full House for consideration. The bill’s companion in the Senate is S 386.

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