Limitations on state withholding and taxation of employee income

(a)

In general

No part of the wages or other remuneration earned by an employee who performs employment duties in more than one State shall be subject to income tax in any State other than— (1)the State of the employee’s residence; and (2)the State within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the income is earned. (b)

Wages or other remuneration

Wages or other remuneration earned in any calendar year are not subject to State income tax withholding and reporting unless the employee is subject to income tax under subsection (a). Income tax withholding and reporting under subsection (a)(2) shall apply to wages or other remuneration earned as of the commencement date of duties in the State during the calendar year. (c)

Operating rules

For purposes of determining an employer’s State income tax withholding and information return obligations— (1)an employer may rely on an employee’s determination of the time expected to be spent by such employee in the States in which the employee will perform duties absent— (A)actual knowledge of fraud by the employee in making the estimate; or (B)collusion between the employer and the employee to evade tax; (2)if records are maintained by an employer recording the location of an employee for other business purposes, such records shall not preclude an employer’s ability to rely on an employee’s determination as set forth in paragraph (1); and (3)notwithstanding paragraph (2), if an employer, at its sole discretion, maintains a time and attendance system which tracks where the employee performs duties on a daily basis, data from the time and attendance system shall be used instead of the employee’s determination as set forth in paragraph (1). (d)

Definitions and special rules

For purposes of this Act: (1)

Day

(A)An employee will be considered present and performing employment duties within a State for a day if the employee performs the preponderance of the employee’s employment duties within such State for such day. (B)Notwithstanding subsection (d)(1)(A), if an employee performs material employment duties in a resident state and one nonresident state during one day, such employee will be considered to have performed the preponderance of the employee’s employment duties in the nonresident state for such day. (C)For purposes of subsection (d)(1), the portion of the day the employee is in transit shall not apply in determining the location of an employee’s performance of employment duties. (2)

Employee

The term employee shall be defined by the State in which the duties are performed, except that the term employee shall not include a professional athlete, professional entertainer, or certain public figures. (3)

Professional athlete

The term professional athlete means a person who performs services in a professional athletic event, provided that the wages or other remuneration are paid to such person for performing services in his or her capacity as a professional athlete. (4)

Professional entertainer

The term professional entertainer means a person who performs services in the professional performing arts for wages or other remuneration on a per-event basis, provided that the wages or other remuneration are paid to such person for performing services in his or her capacity as a professional entertainer. (5)

Certain public figures

The term certain public figures means persons of prominence who perform services for wages or other remuneration on a per-event basis, provided that the wages or other remuneration are paid to such person for services provided at a discrete event in the form of a speech, similar presentation or personal appearance. (6)

Employer

The term employer has the meaning given such term in section 3401(d) of the Internal Revenue Code of 1986 (26 U.S.C. 3401(d)) or shall be defined by the State in which the duties are performed. (7)

State

The term State means each of the several States of the United States. (8)

Time and attendance system

The term time and attendance system means a system where the employee is required on a contemporaneous basis to record his work location for every day worked outside of the state in which the employee’s duties are primarily preformed and the employer uses this data to allocate the employee’s wages between all taxing jurisdictions in which the employee performs duties. (9)

Wages or other remuneration

The term wages or other remuneration shall be defined by the State in which the employment duties are performed.