Jeffrey A. Porter, chair of the American Institute of CPAs’ (AICPA) Tax Executive Committee, urged approval of H.R. 1129, the Mobile Workforce State Income Tax Simplification Act of 2013, at a hearing on the bill by the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Anti-Trust Law on April 29, 2014.
“H.R. 1129 is an important step in state tax simplification.” Porter told the subcommittee members. “We believe the bill provides relief, which is long-overdue, from the current web of inconsistent state income tax and withholding rules on nonresident taxpayers that impact both employers and employees.”
Pictured above are Jeff Porter, left, and Rep. Hank
Porter explained in his testimony that state tax rules applicable to nonresidents are inconsistent and often bewildering to multistate employers and employees.
“Many states tax income earned within the state even if the employee only works in the state for one day,” Porter testified. “Some of the states have a de minimis number of days or de minimis earnings amount before requiring employers to withhold tax on non-residents, or subjecting employees to tax. However, the minimum thresholds are not administered in a uniform manner. For example, a non-resident is subject to tax after working 59 days in Arizona, 15 days in New Mexico, and 14 days in Connecticut.”
Porter said other states have a de minimis exemption based on the amount of the wages earned, either in dollars or as a percent of total income. For example, employers are required to withhold in a non-resident state after an employee earns $1,500 in Wisconsin, $1,000 in Idaho, $800 in South Carolina, and $300 a quarter in Oklahoma. Some states have thresholds which are set at the state’s personal exemption, standard deduction, or filing threshold, which sometimes change each year.
In addition, Porter told the members of Congress that some states exempt, and some do not exempt, from the withholding requirement the income earned from certain activities, including training, professional development, or attending meetings. Sometimes, he said, the exemptions only cover withholding; they do not address the non-resident taxpayer’s filing requirement or tax liability.
“The current situation of having to withhold and file many state non-resident tax returns for just a few days of work in various states is too complicated for both employers and employees,” Porter said. “The bill provides national uniformity and a reasonable 30 day de minimis threshold. Therefore, the AICPA strongly supports H.R. 1129 and respectfully commends the co-sponsors of this legislation for the development of this reasonable and much needed bi-partisan bill.”
Similar legislation has been introduced in the U.S. Senate. For more information about the Senate bill, read the story that appeared in last November’s edition of The CPA Advocate. Information about the House and Senate bills is available on the mobile workforce page on the AICPA’s website.