United States

Federal: Mobile Workforce State Income Tax Simplification Act of 2017 Passes House

Jun 26, 2017
From KPMG TaxWatch

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On June 20, 2017, federal legislation—the ‘‘Mobile Workforce State Income Tax Simplification Act of 2017’’—passed the House by voice vote. The bill, H.R. 1393 is identical to legislation introduced earlier this year in the Senate (S. 540). Both the House and Senate bills have bipartisan support. H.R. 1393 limits a state’s ability to require withholding and payment of personal income taxes unless an employee (1) is a resident of the state, or (2) has been present and performing employment duties in the state for more than 30 days during the calendar year. Similar legislation has been introduced in previous sessions of Congress and was passed by the House in 2012 (H.R. 1864 of the 112th Congress) and September 2016. (H.R. 2315 of the 114th Congress). These bills are significant because currently there is no uniformity among states with respect to when an employer’s obligation to withhold on mobile workers commences, or when a nonresident employee’s presence in state to perform duties triggers a personal income tax filing requirement. H.R. 1393 would likely ameliorate uncertainty for both employers and employees and would also preserve the states’ ability to impose taxes on nonresidents that work for more than 30 days within their borders.

H.R. 1393 clarifies that being “present in a state for a day” means that the employee performs a preponderance of his or her duties in that state during such day. If an employee was to perform material duties in a resident and nonresident state during the same day, the duties would be considered performed in the nonresident state. The term “employee” is defined under the laws of the state where the services were performed; however, professional athletes and entertainers, qualified production employees, and certain public figures are specifically excluded from the definition of employee. If adopted, the Act would become effective on January 1 of the second year that begins after enactment. Please stay tuned to TWIST for further updates on the progress of the companion Senate Bill.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.