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Senate Introduces Mobile Workforce State Income Tax Simplification Act of 2019

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On February 28, 2019 the Senate introduced a bill that would simplify and ease the tax filing and reporting obligations for employees who are temporarily sent to work outside of their home state for a period of 30 days or less.  Various versions of this bill have been introduced previously, the most recent occurring in March 2017; nothing has been passed by the House and Senate. Hence, this bill essentially represents a re-introduction of the Mobile Workforce State Income Tax Simplification Act of 2017.

Specifically, the bill reads, “No part of the wages or other remuneration earned by an employee who performs employment duties in more than one state shall be subject to income tax in any state other than (1) the state of the employee’s residence; and (2) the state within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.”

Since wages would not be taxable in the nonresident state, under this bill employers would likewise be relieved of withholding and reporting requirements in such states provided the aforementioned de minimis presence requirements are met.  Absent an employer’s knowledge of employee fraud, or collusion between employer and employee, an employer may rely on an employee’s annual determination of the time expected to be spent in states outside his or her resident state.  However, if an employer maintains a time and attendance system that tracks where the employee performs duties on a daily basis, data from the time and attendance system shall be used instead of the employee’s determination.

So, what is considered a work day you ask?  Generally, a work day is ascribed to the state in which the employee performs more of his or her services during the day with two noteworthy exceptions:

  1. Time spent in transit does not count as time spent working in a particular location, and
  2. If during the day the employee spends time working only in their resident state and only one nonresident state, the employee will be considered to have performed more of their employment duties in the nonresident state.

As expected, there are a number of exceptions for whom these de minimis presence rule apply.  The following is a list and description of individuals who are NOT considered employees under this bill and, therefore, would not qualify for the 30-day exemption:

  • Professional Athlete – A person who performs services in a professional athletic event and provided wages or other remuneration are paid to such person for performing services in his or her capacity as a professional athlete.
  • Professional Entertainer – A person of prominence who performs services in the professional performing arts and is paid wages or other remuneration on a per-event basis provided that the wages or other remuneration are paid to such person for performing services in his or her capacity as a professional entertainer.
  • Qualified Production Employee - A person who performs production services of any nature directly in connection with a state qualified, certified or approved film, television or other commercial video production for wages or other remuneration, provided that the wages or other remuneration paid to such person are qualified production costs or expenditures under such state’s qualified, certified or approved film incentive program, and that such wages or other remuneration must be subject to withholding under such film incentive program as a condition to treating such wages or other remuneration as a qualified production cost or expenditure.
  • Certain Public Figures – Persons of prominence who perform services for wages or other remuneration on a per-event basis, provided that the wages or other remuneration are paid to such person for services provided at a discrete event, in the nature of a speech, public appearance, or similar event.

While this bill would represent a tremendous win for individual taxpayers and employers by reducing compliance costs, many states are concerned the bill would reduce their tax revenues. We will keep you updated on the status of this legislation.

Steve-Wedge-1592

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