The House Judiciary Committee approved a bill that would simplify state income tax requirements for employees who work multiple days per year outside their home state.
Currently, all states have different income tax reporting requirements for employees who work part-time in their states. Some require employees who work just a few days a year there to file income tax forms in that state. Businesses must also comply with the states’ varying withholding requirements for their employees’ travel.
The Mobile Workforce State Income Tax Simplification Act of 2017 (H.R. 1393) would establish a minimum threshold of 30 days, which means an employee would only be subject to another state’s income taxes if he or she works there more than 30 days per calendar year. An employee’s earnings remain subject to full tax in the state of his or her residence. An employer is also not responsible for withholding on behalf of an employee who is only present in the taxing state for thirty days or fewer.
The bicameral bill was originally introduced in the House by Reps. Mike Bishop (R-MI) and Hank Johnson (D-GA), and in the Senate by Sens. John Thune (R-SD) and Sherrod Brown (D-OH). It was approved in the House Judiciary Committee by a vote of 19-2.
“American small businesses are able to grow faster than ever before, and sometimes that requires sending employees out-of-state as the business expands into new markets,” Committee Chairman Bob Goodlatte (R-VA) said. When a small business owner is faced with additional compliance requirements for employees working temporarily in different states, those costs can add up, hurting the growth of the business as a whole and penalizing success.”
The chairman said the bill would ease the regulatory burdens on small businesses.
“This bipartisan bill is one of the tools that we can give our nation’s small businesses to grow and ultimately succeed in the 21st century economy,” Goodlatte said.