Businesses, including small businesses and family businesses that operate interstate as well as their employees, are subject to a significant burden of complying with inconsistent nonresident state income tax withholding laws. Representative Howard Coble, a Republican from North Carolina, and Representative Hank Johnson, a Democrat from Georgia, have introduced H.R. 1129, the Mobile Workforce State Income Tax Simplification Act of 2013, to address this problem.
The American Institute of CPAs (AICPA) supports H.R. 1129 because a uniform national standard would eliminate an unnecessary burden on small businesses and their employees. The bill strikes a balance between interests of the states in taxing work being done within their borders and the needs of businesses to be able to operate efficiently, especially in the current economic climate.
There are 41 states that impose a personal income tax on wages and partnership income, and there are many differing tax requirements regarding the withholding for income tax of nonresidents among those 41 states. Having a uniform national standard for state nonresident income tax withholding would significantly improve the current complex and inconsistent nonresident income tax withholding laws and increase compliance.
H.R. 1129 would create a uniform national standard and limit state or local taxation, reporting, and withholding of the compensation of any employee who performs duties in more than one state or locality to: (1) the state or locality of the employee's residence; and (2) the state or locality in which the employee is physically present performing duties for more than 30 days. The bill would not apply to professional athletes, professional entertainers, and certain public figures.
H.R. 1129 is the same bill sponsored by Representatives Coble and Johnson in the last Congress. That measure passed the House but stalled in the Senate. Senator Sherrod Brown (D-OH) and former Senator Kay Bailey Hutchison (R-TX) sponsored the same legislation in the Senate in the last Congress.
The AICPA submitted written testimony in 2007 and 2011 to the House Judiciary Subcommittee on Commercial and Administrative Law in support of similar bills introduced in the House.