The American Institute of CPAs, and state CPA societies with U.S. representatives serving on the House Judiciary Committee, successfully encouraged Judiciary Committee members, in November, to approve a bill that would reduce the regulatory burdens facing businesses that must comply with numerous non-resident state income tax withholding laws. The Judiciary Committee met on Nov. 17, 2011 and approved the bill on a bipartisan vote, which means it is eligible for consideration and passage by the full U.S. House of Representatives.
In her letter to Representative Jason Chaffetz, a Utah Republican, Michelle McGaughey, CEO of the Utah Association of CPAs, wrote on behalf of the UACPA Board that “Many CPA firms in our state have employees who periodically work in states other than Utah. And these CPA firms have many business clients with employees who work in more than one state…In addition, CPAs employed by companies with multi-state operations are similarly affected. Because of the myriad of state income tax withholding laws, and varying de minimis exemption periods, compliance is extremely difficult and time-consuming.”
Sixteen state CPA societies sent similar letters to their Members on the House Judiciary Committee.
Businesses, including small businesses and family businesses that operate interstate, struggle regularly with this compliance burden. For a number of years, the AICPA has supported a uniform national standard regarding state income tax withholding for individuals who work interstate for a number of years. Approval of the bill, H.R. 1864, the Mobile Workforce State Income Tax Simplification Act of 2011, by the Judiciary Committee is the first legislative step toward enactment.
The AICPA supports H.R. 1864 because a uniform national standard would eliminate an unnecessary burden on small business and the bill would strike 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 non-residents among those 41 states. Having a uniform national standard for state non-resident income tax withholding would significantly ameliorate the current complex system of non-resident income tax withholding laws and increase compliance.
H.R. 1864 would create a uniform national standard and limited state or local taxation 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 work days.
The AICPA continues to work with a coalition to encourage House leadership to move the bill to the House floor, and then to the Senate.
H.R.1864 was introduced by Reps. Howard Coble, a Republican from North Carolina, and Hank Johnson, a Democrat from Georgia.
Read the AICPA’s letter to the House Judiciary Committee.