Mobility

September 2017

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32 Mobility | September 2017 WORLDWIDE ERC ® GOVERNMENT AFFAIRS 2017 A legislative change long supported by Worldwide ERC ® and a large coalition that includes many of Worldwide ERC ® 's multinational corporate members has again passed the House of Representatives and been sent to the Senate for action. H.R. 1393, "The Mobile Workforce State Income Tax Simplification Act of 2017," solves a long-standing problem for companies with workers who occasion - ally work in states other than their state of residence. Such workers are subject to tax in states where they work temporarily, and the employer may be subject to withholding of that state's income tax, but there is no uniform standard as to when such taxation or withholding begins. According to the committee report for H.R. 1393, the District of Columbia and 43 states levy a per - sonal income tax on wages, but each has its own rules for when taxation and withholding begin. Some have a days-worked-in-state standard, which varies from as little as one day (New York) to 59 days (Arizona). Others have a dollars-earned-in- state threshold, for example, $1,500 (Wisconsin), $1,000 (Idaho), $800 (South Carolina), and $300 (Oklahoma). In addition, the standard for taxation of the employee may differ from the standard for withholding by the employer. Moreover, for employ - ees who reside in the nine states with no income tax, taxation in other states imposes a tax burden for which there is no home-state credit available. This patchwork of rules is extremely complicated for companies with a mobile workforce, which must not only track the workers but then apply a different rule for each state. H.R. 1393 substantially simplifies that task by imposing a uniform standard for nonresident taxation and withholding. The bill provides that an employee is not subject to tax in a particular state until the employee has worked there for more than 30 days during the year, nor is withholding required. Once the 30-day threshold is crossed, however, tax and withholding apply to all wages earned in the state from the first day. The bill also provides that employers may rely on the employee's report of days spent in particular jurisdictions. They are not required to maintain their own tracking systems, but they can voluntarily use a time and attendance system to track employees. States have opposed the bill, based on the loss of their authority to impose taxes. The Multistate Tax Commission has argued for a state solution and has put forward model state legislation. However, such a solution would have to be adopted by each state. Some states also would stand to lose tax revenue. For example, New York is estimated to lose between $50 million and $100 million, and a few other states with large employment centers close to state bor - ders (such as Illinois, Massachusetts, and California) would lose some revenue. But other states, such as New Jersey, would gain revenue. And an analysis cited by the House Judiciary Committee in its report finds that nationwide, a net revenue change of only 0.01 percent, or about $42 million, would result. That is because states in general provide a credit for taxes paid to another state. When income is not taxed in one state, some other state is relieved of the requirement to provide a credit for those taxes. Consequently, the revenue impact of the provision is minimal, while the administrative relief it provides to companies and employees is substantial. The Mobile Workforce Act has been regularly introduced in Congress since 2007 and has passed the House on two prior occasions, in 2011 and 2015. Each time, the bill died in the Senate Finance Committee. However, momentum is increasing in the Senate. House Sends Mobile Workforce Bill to Senate By Peter Scott

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