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 wages or other remuneration is earned.(b)

Wages or other remuneration

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

Operating rules

For purposes of determining penalties related to an employer’s State income tax withholding and reporting requirements—(1)an employer may rely on an employee’s annual determination of the time expected to be spent by such employee in the States in which the employee will perform duties absent—(A)the employer’s actual knowledge of fraud by the employee in making the determination; or(B)collusion between the employer and the employee to evade tax;(2)except as provided in paragraph (3), if records are maintained by an employer in the regular course of business that record the location of an employee, such records shall not preclude an employer’s ability to rely on an employee’s determination under paragraph (1); and(3)notwithstanding paragraph (2), if an employer, at its sole discretion, maintains a time and attendance system that 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 under paragraph (1).(d)

Definitions and special rules

For purposes of this Act:(1)

Day

(A)Except as provided in subparagraph (B), an employee is considered present and performing employment duties within a State for a day if the employee performs more of the employee’s employment duties within such State than in any other State during a day.(B)If an employee performs employment duties in a resident State and in only one nonresident State during one day, such employee shall be considered to have performed more of the employee’s employment duties in the nonresident State than in the resident State for such day.(C)For purposes of this paragraph, the portion of the day during which the employee is in transit shall not be considered in determining the location of an employee’s performance of employment duties.(2)

Employee

The term employee has the same meaning given to it by the State in which the employment duties are performed, except that the term employee shall not include a professional athlete, professional entertainer, qualified production employee, 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 of prominence 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)

Qualified production employee

The term qualified production employee means a person who performs production services of any nature directly in connection with a State qualified, certified or approved film, television or other commercial video production for wages or other remuneration, provided that the wages or other remuneration paid to such person are qualified production costs or expenditures under such State’s qualified, certified or approved film incentive program, and that such wages or other remuneration must be subject to withholding under such film incentive program as a condition to treating such wages or other remuneration as a qualified production cost or expenditure.(6)

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 nature of a speech, public appearance, or similar event.(7)

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)), unless such term is defined by the State in which the employee’s employment duties are performed, in which case the State’s definition shall prevail.(8)

State

The term State means any of the several States.(9)

Time and attendance system

The term time and attendance system means a system in which—(A)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 employment duties are primarily performed; and(B)the system is designed to allow the employer to allocate the employee’s wages for income tax purposes among all States in which the employee performs employment duties for such employer.(10)

Wages or other remuneration

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