United States

Will congress pass mobile workforce legislation in 2017?

TAX BLOG


Over the past decade, Congress has seen mobile workforce bills introduced in each session like clockwork. The intent of mobile workforce is to create a federal solution to the incongruity between the states’ income tax treatment of non-resident workers. Late last year in the final months of the 114th Congress, H.R. 2315 passed the House, but stagnated shortly after it was received in the Senate – likely due to the elections and the session wrapping up.

A follow-up to that bill was introduced in the 115th Congress. On March 22, 2017, H.R. 1393, titled the Mobile Workforce State Income Tax Simplification Act of 2017 (Mobile Workforce Act), passed the House Judiciary Committee with a 19-2 vote after only a few weeks of consideration – an encouraging sign for proponents of the bill.

The Mobile Workforce Act provides a federal solution to the continuing controversy over whether there should be a national standard for the minimum amount of time an employee must work in a non-resident state before incurring a state income tax liability requiring the employee to file an income tax return, and the employer to withhold and remit payroll taxes. The Mobile Workforce Act seeks to create a 30-day safe harbor from state income taxes and state withholding requirements, with certain exemptions for athletes and entertainers, in order to lessen the administrative burden on businesses in hopes of encouraging compliance.  

Currently, state standards vary greatly – some states impose an income tax liability on the first day worked in the non-resident state, while others, such as Hawaii and Arizona, offer a 60-day safe harbor before liability attaches. Adding to the burden and complexity of the state laws, some state thresholds for withholding are not identical to resident income tax withholding thresholds. The current system is becoming increasingly burdensome on multistate businesses due to the growing number of employees that conduct business travel to non-resident states. As travel among the states increases, so does the cost to comply with each state’s separate requirements.

Also encouraging to supporters of the Mobile Workforce Act, the Congressional Budget Office released a report estimating a minimal total state revenue impact between $55 and $100 million in 2020 and no impact to federal revenues. Building on the recent success of prior versions of mobile workforce bills, anticipation is high that Congress will pass a federal solution in the next year or two. 


Brian Kirkell

Principal

Brian provides advanced technical analysis of state and local tax issues important to middle market businesses. Reach him at brian.kirkell@rsmus.com.

Areas of focus: Washington National TaxState and Local TaxOnline and Remote Seller Sales Tax