On September 22, 2016, the House of Representatives approved a bill that would simplify state and local tax reporting for telecommuters and out-of-state employees. The Mobile Workforce State Income Tax Simplification Act of 2015 is now in the hands of the Senate.

Efforts to pass a bill to simplify state and local income tax withholding began in 2006. Lawmakers sought to create a national framework for income tax and employer withholding treatment on employees who live in a different state than the one in which they work. Earlier iterations of the Mobile Workforce State Income Tax Simplification Act of 2015 have cleared the House but failed to pass in the Senate.

The current version comes with the AICPA’s support. Provisions under the bill would create a 30-day de minimis exemption, where employees who work in a state in which they are not residents would not be subject to nonresident tax treatment. A de minimis safe harbor could significantly reduce cost and complexity for both employees and employers. Under current regulations, some states tax nonresident wages even if the employee worked in the state for only one day. Other states have varying lengths of de minimis exemptions; Arizona’s is 59, New Mexico’s is 15 and Connecticut’s is 14.

States also have different requirements for exempt activities and reciprocity agreements for employees who live along state borders. The bill could help streamline these differences as well.

With the 2016 election and the bill’s track record in the Senate, it is likely that the Mobile Workforce State Income Tax Simplification Act of 2015 will not be approved before year end. If it were approved, the bill would be adopted on a prospective basis.

We will keep you up-to-date as developments become available. For comments, questions or concerns about the impact of the Mobile Workforce State Income Tax Simplification Act of 2015, please contact us.

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