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House Approves Measure to Prevent States from Taxing Temporary Non-Resident Workers

May 15, 2012- The Mobile Workforce State Income Tax Simplification Act (H.R.1864) was passed by the House.

The legislation would require the earnings of out-of-state employees to be subject to State Income Tax and Withholding if the employee’s perform work in a state for more than 30 days in a calendar year.

The bill was sent to the Committee on Finance on May 16, 2012.

The legislation is meant to clear up inconsistencies in State Income Tax Laws that impose differing time frames on mobile workers. For example, among 41 different state laws, a worker could owe tax in one state for working on day and in another state after 60 days.

Rep. Hank Jonhson (D-Ga.) who introduced the bill with Rep. Howard Coble (R-N.C.) stated the bill would help small businesses cut administrative costs through a uniform law without the undue burden of the current systems. The measure would also reduce the administrative costs to States and have minimal or no revenue cost to the majority of states.

“Tax Simplification” on both the Federal and State Level, would allow workers and employers to predict their tax liabilities with accuracy and expend fewer resources researching nuances of each States Tax Law, Coble said,

The bill was approved in November by the House Judiciary committee with bipartisan support despite some questions over the constitutionality of the measure. At an earlier hearing on the measure, the American Institute of Certified Public Accountants expressed concerns over language in the bill that made withholding retroactive for the First 30 days.

Those concerns were addressed in the following months so that it could be brought to the floor, said Brady King Director of Congressional and Political affairs for AICPA.

States continue to oppose the measure because it preempts state authority to create tax systems that work for their individual revenue and constituents’ needs, said Gale Garriott Executive Director for the Federation of Tax Administrators.

Under the proposal, a tax system would be forced on the states that would cost millions of dollars.

Brady King stated, momentum from House passage and bipartisan support in the Judiciary committee could spur the measure forward.


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