The Mobile Workforce State Income Tax Simplification Act, S. 386, was introduced on February 5 by Senators John Thune (R-S.D.) and Sherrod Brown (R-Ohio), both members of the Senate Finance Committee. The bill would establish a 30-day threshold test for state income tax purposes, which would standardize income tax collection between states, and is identical to the bill they introduced in the last Congress. S. 386 enjoys bipartisan support and is currently cosponsored by six senators.
S. 386 is supported by the American Institute of CPAs (AICPA), which has pushed Congress for more than five years to pass such a measure so that employees who work part time during the year in more than one state, and their employers, would have a consistent set of state income tax and withholding rules to follow. The AICPA plays a leading role in the Mobile Workforce Coalition, which is comprised of more than 250 companies and organizations from across the country supporting the legislation.
“We are pleased that Senator Thune and Senator Brown are continuing their fight to pass mobile workforce legislation and that they introduced the bill so quickly after the start of the new Congress,” Brady King, AICPA director of congressional and political affairs, said. “They are essential players in the process and we commend their persistence and dedication. We expect the House version of this bill to be introduced very soon.”
At a hearing on the House version of the same bill last April before the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Anti-Trust Law, Jeffrey Porter, CPA, who was then the chair of the AICPA Tax Executive Committee, 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.
Many of the state CPA societies have joined the AICPA in its effort to have mobile workforce legislation enacted.
Scott D. Wiley, president and CEO of the Ohio Society of CPAs, said about the introduction of S. 386, “CPAs are extremely grateful to Senator Brown and Senator Thune for introducing mobile workforce legislation again in this Congress. The bill is an important step forward and would extend the benefits businesses will see through a similar municipal income tax reform measure passed in Ohio.”
Laura Coome, executive director of the South Dakota CPA Society, said, “The current system is especially harmful to residents of states like South Dakota who do not have a personal income tax. Workers in these states are forced to pay an out-of-pocket tax with no ability to obtain a home state credit or offset.”