Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers

(a)

In general

Chapter 4 of title 4, United States Code, is amended by adding at the end the following:

127.

Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers

(a)

In general

In applying its income tax laws to the compensation of a nonresident individual, a State may deem such nonresident individual to be present in or working in such State for any period of time only if such nonresident individual is physically present in such State for such period and such State may not impose nonresident income taxes on such compensation with respect to any period of time when such nonresident individual is physically present in another State.(b)

Determination of physical presence

For purposes of determining physical presence, no State may deem a nonresident individual to be present in or working in such State on the grounds that—(1)such nonresident individual is present at or working at home for convenience, or(2)such nonresident individual’s work at home or office at home fails any convenience of the employer test or any similar test.(c)

Determination of periods of time with respect to which compensation is paid

For purposes of determining the periods of time with respect to which compensation is paid, no State may deem a period of time during which a nonresident individual is physically present in another State and performing certain tasks in such other State to be—(1)time that is not normal work time unless such individual’s employer deems such period to be time that is not normal work time,(2)nonworking time unless such individual’s employer deems such period to be nonworking time, or(3)time with respect to which no compensation is paid unless such individual’s employer deems such period to be time with respect to which no compensation is paid.(d)

Definitions

As used in this section—(1)

Compensation

The term compensation means the salary, wages, or other remuneration earned by an individual for personal services performed as an employee or as an independent contractor.(2)

Employee

The term employee means an employee as defined by the State in which the nonresident individual is physically present and performing personal services for compensation.(3)

Employer

The term employer means the person having control of the payment of an individual’s compensation. (4)

Income tax

The term income tax has the meaning given such term by section 110(c).(5)

Income tax laws

The term income tax laws includes any statutes, regulations, administrative practices, administrative interpretations, and judicial decisions. (6)

Nonresident individual

The term nonresident individual means an individual who is not a resident of the State applying its income tax laws to such individual. (7)

State

The term State means each of the several States (or any subdivision thereof), the District of Columbia, and any territory or possession of the United States.(e)

No inference

Nothing in this section shall be construed as bearing on—(1)any tax laws other than income tax laws,(2)the taxation of corporations, partnerships, trusts, estates, limited liability companies, or other entities, organizations, or persons other than nonresident individuals in their capacities as employees or independent contractors,(3)the taxation of individuals in their capacities as shareholders, partners, trust and estate beneficiaries, members or managers of limited liability companies, or in any similar capacities, and(4)the income taxation of dividends, interest, annuities, rents, royalties, or other forms of unearned income.

(b)

Clerical amendment

The table of sections of such chapter 4 is amended by adding at the end the following new item:

127. Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers.

(c)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.