Legislation backed by the American Institute of Certified Public Accountants that would establish a uniform national standard for non-resident state income tax withholding has been introduced in Congress and was the subject of a May 25 hearing by a House Judiciary Committee panel.
With 43 states and the District of Columbia imposing varying requirements for withholding on personal income tax on wages and partnership income of non-residents, the regulatory burden for businesses and accounting firms that operate interstate is significant.
The AICPA believes that having a uniform standard would increase compliance and eliminate the burden of having to maintain a working knowledge of the state tax laws in a state where an employee does not reside. In addition, there needs to be a de minimis exemption of at least 30 days before an employee is obligated to pay.
“Local taxation issues have now become national in scope, and these burdens must be eased in order to promote interstate commerce and ensure it runs efficiently,” Jeffrey A. Porter, CPA said at the hearing before the House Judiciary Subcommittee on Commercial and Administrative Law.
H.R. 1864, the Mobile Workforce State Income Tax Simplification Act of 2011, would provide a uniform national standard that would limit state or local taxation of the compensation of an 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 was introduced by North Carolina Republican Howard Coble and Georgia Democrat Hank Johnson. Representative Coble is the chairman of the House Judiciary Subcommittee on Commercial and Administrative Law, which has jurisdiction over the issue.
AICPA Key Persons helped secure co-sponsorship of H.R. 1864 by Oklahoma Democrat Dan Boren, Utah Republican Jason Chaffetz, Florida Republican Ander Crenshaw, Arizona Republican Trent Franks, South Carolina Republican Trey Gowdy, Florida Republican Dennis Ross and Texas Republican Pete Sessions.
Introduction of a similar bill in the Senate is expected.
Read the AICPA press release and testimony.