House Judiciary on the Mobile Workforce State Income Tax Simplification Act
On April 29th, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial, and Antitrust Law held a hearing on H.R. 1129, the Mobile Workforce State Income Tax Simplification Act of 2013.
Opening Remarks:
In his opening statement, Subcommittee Chairman Spencer Baucus (R-Ala.) said, “As the workforce becomes mobile, without a uniform approach, employees face an administrative burden of putting in an income tax form for every state they visit even if just for a day. The MWFA ensures stats are paid correct amount of tax without burdening employees.” Baucus explained that under current law, employees have a 30 day threshold to report state income tax and employers are not required to withhold income taxes until the 30 day limit is reached, then state tax applies. In most states, he assured that the impact of this legislation on state revenue would amount to less than 1/10th of one percent. Baucus assured the committee that this bill is a bipartisan measure with historic support.
Rep. Bob Goodlatte (D-Va.) said, in opening remarks, that an employee who performs work in a non-residence state faces an array of laws. According to Goodlatte, these burdens are felt by small businesses which do not have the resources to comply with over 40 state tax regimes. In his opinion, existing state income tax laws burden small businesses and send employees to other states while companies are forced to devote resources to comply with various state income tax laws. Goodlatte explained, the problem is presented by the multitude of state income laws and he demanded a federal solution. He added that the bill insures employees know when they are liable for out-of-state income taxes and agreed that the bill enjoys bipartisan support.
Rep. Johnson (R-Ga.) added that this is an important bipartisan bill that would reduce administrative costs to states and lessen costs to consumers. He contended that this bill would establish uniform law.
Witness Testimony:
Maureen Riehl of the Vice President of Government Affairs with the Council on State Taxation (COST) testified on behalf of COST and the Mobile Workforce Coalition. Riehl explained that this tax treatment is a widespread problem that Congress has recognized and fixed before. She testified, “Congress is the appropriate body to create and enact a uniform, federal standard for nonresident taxation.”
Riehl added that H.R. 1129 addresses a problem that is universally recognized. She discussed that the proposed solution is widely accepted as an appropriate solution with a 30 day threshold period and associated operating rules that address both employee liability and employer withholding.
Jeffery A. Porter, Founder and Owner of Porter and Associates, testified on behalf of the American Institute of Certified Public Accountants in support of H.R. 1129. He stated that the AICPA believes the bill provides relief, which is long-overdue, from the current web of inconsistent state income tax and withholding rules that impact employers and employees.
Porter explained that this bill is an important step in tax simplification for state income tax purposes and urged the committee to establish both a uniform standard for non-resident income tax withholding and a de minimis exception from the assessment of state income tax as stated in H.R. 1129. Porter shared anecdotal evidence of workers impacted by the current rules when traveling out of state. He explained the difficulty of tracking this information as an employer in order to comply and the challenge of complying when traveling for short periods of time as a non-resident.
Patrick Carter, Director of the Division of Revenue for the State of Delaware, testified on behalf of the Federation of Tax Administrators (FTA) in opposition to H.R.1129. He argued that the bill would “limit the ability of state and local governments to impose and enforce existing income taxes on individuals working in multiple states.” Carter contended that H.R. 1129 runs directly counter to the source principle of income taxation. He also argued that the 30-day threshold amounts to a full six work-weeks, which is greater than what is currently allowed by most states with statutory thresholds. In addition, he said, the State of New York alone estimates that it would experience a revenue loss of $106 million annually as a result of H.R. 1129. Carter continued that H.R. 1129 would allow workers to shift income to other jurisdictions.
Additionally, Carter said that the bill limits states recordkeeping and reporting abilities and ignores how much an individual is compensated for services performed in a state. Carter suggested that the bill will create situations in which individuals in relatively similar situations are treated differently because of legislation with ambiguous terms leading to possible litigation and various interpretations. Finally, Carter urged the Subcommittee to consider that H.R. 1129 represents a substantial intrusion by the federal government into state sovereignty. In his view, the federal government should minimize its role in state authority.
Lori Brown, Director of Disbursements at CACI International Inc. testified on behalf of the American Payroll Association, in support of H.R. 1129. She argued before the Subcommittee that this issue “cuts across all demographics, from large to small employers, public and private sector, union and nonunion, nonprofit and for-profit, and all others.” Furthermore, she discussed that employees working in one state while living in another state can be forced to deal with complicated withholding standards. This means that temporary out-of-state work assignments create burdens on both employers and employees, said Brown. Additionally, she explained that most states tax all wages earned within their borders by residents of other states.
For more information on this hearing, please click here and for SIFMA’s statement for the record, please click here.
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On April 29th, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial, and Antitrust Law held a hearing on H.R. 1129, the Mobile Workforce State Income Tax Simplification Act of 2013.
Opening Remarks:
In his opening statement, Subcommittee Chairman Spencer Baucus (R-Ala.) said, “As the workforce becomes mobile, without a uniform approach, employees face an administrative burden of putting in an income tax form for every state they visit even if just for a day. The MWFA ensures stats are paid correct amount of tax without burdening employees.” Baucus explained that under current law, employees have a 30 day threshold to report state income tax and employers are not required to withhold income taxes until the 30 day limit is reached, then state tax applies. In most states, he assured that the impact of this legislation on state revenue would amount to less than 1/10th of one percent. Baucus assured the committee that this bill is a bipartisan measure with historic support.
Rep. Bob Goodlatte (D-Va.) said, in opening remarks, that an employee who performs work in a non-residence state faces an array of laws. According to Goodlatte, these burdens are felt by small businesses which do not have the resources to comply with over 40 state tax regimes. In his opinion, existing state income tax laws burden small businesses and send employees to other states while companies are forced to devote resources to comply with various state income tax laws. Goodlatte explained, the problem is presented by the multitude of state income laws and he demanded a federal solution. He added that the bill insures employees know when they are liable for out-of-state income taxes and agreed that the bill enjoys bipartisan support.
Rep. Johnson (R-Ga.) added that this is an important bipartisan bill that would reduce administrative costs to states and lessen costs to consumers. He contended that this bill would establish uniform law.
Witness Testimony:
Maureen Riehl of the Vice President of Government Affairs with the Council on State Taxation (COST) testified on behalf of COST and the Mobile Workforce Coalition. Riehl explained that this tax treatment is a widespread problem that Congress has recognized and fixed before. She testified, “Congress is the appropriate body to create and enact a uniform, federal standard for nonresident taxation.”
Riehl added that H.R. 1129 addresses a problem that is universally recognized. She discussed that the proposed solution is widely accepted as an appropriate solution with a 30 day threshold period and associated operating rules that address both employee liability and employer withholding.
Jeffery A. Porter, Founder and Owner of Porter and Associates, testified on behalf of the American Institute of Certified Public Accountants in support of H.R. 1129. He stated that the AICPA believes the bill provides relief, which is long-overdue, from the current web of inconsistent state income tax and withholding rules that impact employers and employees.
Porter explained that this bill is an important step in tax simplification for state income tax purposes and urged the committee to establish both a uniform standard for non-resident income tax withholding and a de minimis exception from the assessment of state income tax as stated in H.R. 1129. Porter shared anecdotal evidence of workers impacted by the current rules when traveling out of state. He explained the difficulty of tracking this information as an employer in order to comply and the challenge of complying when traveling for short periods of time as a non-resident.
Patrick Carter, Director of the Division of Revenue for the State of Delaware, testified on behalf of the Federation of Tax Administrators (FTA) in opposition to H.R.1129. He argued that the bill would “limit the ability of state and local governments to impose and enforce existing income taxes on individuals working in multiple states.” Carter contended that H.R. 1129 runs directly counter to the source principle of income taxation. He also argued that the 30-day threshold amounts to a full six work-weeks, which is greater than what is currently allowed by most states with statutory thresholds. In addition, he said, the State of New York alone estimates that it would experience a revenue loss of $106 million annually as a result of H.R. 1129. Carter continued that H.R. 1129 would allow workers to shift income to other jurisdictions.
Additionally, Carter said that the bill limits states recordkeeping and reporting abilities and ignores how much an individual is compensated for services performed in a state. Carter suggested that the bill will create situations in which individuals in relatively similar situations are treated differently because of legislation with ambiguous terms leading to possible litigation and various interpretations. Finally, Carter urged the Subcommittee to consider that H.R. 1129 represents a substantial intrusion by the federal government into state sovereignty. In his view, the federal government should minimize its role in state authority.
Lori Brown, Director of Disbursements at CACI International Inc. testified on behalf of the American Payroll Association, in support of H.R. 1129. She argued before the Subcommittee that this issue “cuts across all demographics, from large to small employers, public and private sector, union and nonunion, nonprofit and for-profit, and all others.” Furthermore, she discussed that employees working in one state while living in another state can be forced to deal with complicated withholding standards. This means that temporary out-of-state work assignments create burdens on both employers and employees, said Brown. Additionally, she explained that most states tax all wages earned within their borders by residents of other states.
For more information on this hearing, please click here and for SIFMA’s statement for the record, please click here.