[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
      MOBILE WORKFORCE STATE INCOME TAX SIMPLIFICATION ACT OF 2013

=======================================================================



                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                           REGULATORY REFORM,

                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 1129

                               __________

                             APRIL 29, 2014

                               __________

                           Serial No. 113-91

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov




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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
SPENCER BACHUS, Alabama              SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina       DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   SPENCER BACHUS, Alabama, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
TOM MARINO, Pennsylvania               Georgia
GEORGE HOLDING, North Carolina       SUZAN DelBENE, Washington
DOUG COLLINS, Georgia                JOE GARCIA, Florida
JASON T. SMITH, Missouri             HAKEEM JEFFRIES, New York
                                     DAVID N. CICILLINE, Rhode Island

                      Daniel Flores, Chief Counsel


                            C O N T E N T S

                              ----------                              

                             APRIL 29, 2014

                                                                   Page

                                THE BILL

H.R. 1129, the ``Mobile Workforce State Income Tax Simplification 
  Act of 2013''..................................................     3

                           OPENING STATEMENTS

The Honorable Spencer Bachus, a Representative in Congress from 
  the State of Alabama, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable David N. Cicilline, a Representative in Congress 
  from the State of Rhode Island, and Member, Subcommittee on 
  Regulatory Reform, Commercial and Antitrust Law................     9
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Member, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     9
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law    10

                               WITNESSES

Maureen B. Riehl, Esq., Vice President, Government Affairs, 
  Council on State Taxation (COST), on behalf of COST and the 
  Mobile Workforce Coalition
  Oral Testimony.................................................    12
  Prepared Statement.............................................    14
Jeffrey A. Porter, CPA, Founder and Owner of Porter & Associates, 
  on behalf of the American Institute of Certified Public 
  Accountants
  Oral Testimony.................................................    31
  Prepared Statement.............................................    33
Lori Brown, CPP, Director of Disbursements, CACI International, 
  Inc., on behalf of the American Payroll Association
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42
Patrick Carter, Director, Division of Revenue for the State of 
  Delaware, on behalf of the Federation of Tax Administrators
  Oral Testimony.................................................    73
  Prepared Statement.............................................    75

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan..........   102
Prepared Statement of the Honorable Jim Himes, a U.S. Senator 
  from the State of Connecticut..................................   107
Prepared Statement of the Federation of Tax Administrators.......   109


      MOBILE WORKFORCE STATE INCOME TAX SIMPLIFICATION ACT OF 2013

                              ----------                              


                        TUESDAY, APRIL 29, 2014

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 1:08 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Spencer 
Bachus, (Chairman of the Subcommittee) presiding.
    Present: Representatives Bachus, Goodlatte, Marino, 
Collins, Johnson, DelBene, Garcia, Jeffries, and Cicilline.
    Staff Present: (Majority) Anthony Grossi, Counsel; Jaclyn 
Louis, Legislative Director for Rep. Marino; Ashley Lewis, 
Clerk; and (Minority) Norberto Salinas, Counsel.
    Mr. Bachus. Good afternoon. The Subcommittee on Regulatory 
Reform, Commercial and Antitrust Law hearing will come to 
order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    The focus of today's hearing is the Mobile Workforce State 
Income Tax Simplification Act of 2013. The legislation 
institutes straightforward, commonsense rules for when a state 
may tax a non-resident employee.
    As the American workforce becomes increasingly mobile, 
there is a greater need to establish clear rules that define 
when employees trigger income tax liability and when employers 
should withhold these taxes. Without the uniform approach of a 
model workforce act, employees face the administrative burden 
of potentially filing an income tax return in every state they 
visit, even if only for 1 day.
    According to the Federation of Tax Administrators, 
complying with the current system is difficult and probably 
impractical. The Mobile Workforce Act provides for a fair and 
easily administered system that ensures that states are paid 
the correct amount of taxes without unduly burdening our 
workforce. The Act's simple system revolves around establishing 
a 30-day threshold before state income tax liability is 
triggered. In other words, employees may work in a state for up 
to 30 days without incurring an obligation to file an income 
tax return in that state.
    Additionally, employers are not required to withhold income 
taxes until the 30-day threshold is reached. After an employee 
works in a state beyond the threshold, the state's existing tax 
laws apply.
    The Mobile Workforce Act strikes a careful balance between 
preserving states' ability to tax those who work within their 
borders and use their resources while ensuring that our 
nation's workforce is not impeded by burdensome administrative 
obligations. This legislation has evolved since its original 
introduction in 2006 to account for concerns raised by state 
taxing authorities. Over this time period, the threshold was 
shortened from 60 days to 30 days, definitions were revised, 
and the effective date was delayed to allow for a smooth 
implementation.
    Furthermore, great care was taken to diminish the impact 
the Act would have on state revenues. An Ernst & Young study 
performed on substantially similar legislation last Congress 
found that the bill would result in a very small rise in 
revenue in some states and a tiny reduction in revenue in other 
states. In most states, the impact on revenues will be less 
than one-tenth of 1 percent, and in no state will it impact 
revenues more than seven-tenths of a percent.
    Of course, what these figures do not account for is the 
potential increase in other tax revenue from employees 
traveling to their states for conferences or meetings now that 
the specter of incurring an income tax filing obligation no 
longer exists.
    The Mobile Workforce Act is a bipartisan measure. It 
includes my predecessor, the Subcommittee Chair, Mr. Coble, and 
our current Ranking Member, Mr. Johnson, as its lead sponsors 
and advocates. The bill historically has enjoyed broad support, 
and identical legislation was passed by the full House by 
unanimous consent in 2012.
    Today's witnesses undoubtedly will add to the record in 
support of the bill, and I look forward to hearing their 
testimony.

    [The bill, H.R. 1129, follows:]

    
    
        
                               __________

    Mr. Bachus. At this time, I will recognize Mr. Cicilline.
    Mr. Cicilline. Thank you, Mr. Chairman. I look forward to 
hearing from the witnesses. I know Mr. Johnson is en route.
    Mr. Bachus. Thank you.
    At this time, I will recognize the Chairman of the full 
Committee, Mr. Goodlatte, for an opening statement.
    Mr. Goodlatte. Thank you, Mr. Chairman. I appreciate your 
holding this hearing.
    As it stands today, an employee who performs work in a non-
resident state likely faces a myriad of disparate income tax 
laws. The complexity and variation of these state income tax 
laws places a significant burden on the American workforce. 
These burdens are most heavily felt by small businesses, which 
simply do not have the resources and can ill afford to focus 
their time on complying with over 40 different state tax 
regimes. Witnesses at two separate hearings before this 
Committee have testified that existing state income tax laws 
impose an undue burden on small businesses' ability to deploy 
workforces across state lines. Small businesses do not shoulder 
this burden alone. Cumbersome and complex state income tax laws 
also put a strain on large companies.
    The Sarbanes-Oxley Act requires the management of these 
companies to sign off on internal controls that ensure they are 
in compliance with state tax laws. Further, Sarbanes-Oxley 
requires auditors to certify management's assessment of 
companies' compliance with these tax laws. Because state income 
tax laws are so diverse, large businesses and their auditors 
are required to invest a significant amount of time and money 
ensuring that companies have withheld correctly for each 
employee.
    Rather than expanding their payrolls or reducing the prices 
of goods for consumers, companies are forced to devote their 
resources to complying with complicated state income tax laws. 
The Constitution grants Congress the authority to enact laws to 
protect the free flow of commerce among the states. While 
Congress should exercise its authority with care and caution, 
the problem imposed by the complex array of existing state 
income tax laws deserves a Federal solution.
    The Mobile Workforce State Income Tax Simplification Act is 
a carefully crafted bill that creates a simple and easy-to-
administer system for the imposition of state income tax laws. 
By creating a bright-line 30-day threshold to determine non-
resident income tax liability, the bill ensures that employees 
will have a clear understanding of when they are liable for 
non-resident state income taxes, and employers will be able to 
accurately withhold these taxes.
    By reducing an obvious administrative burden, the Mobile 
Workforce Act will allow small businesses to focus their 
resources on growing their operations and allow larger 
businesses to focus on increasing their payrolls and reducing 
the prices of their goods.
    The Mobile Workforce Act enjoys broad bipartisan support, 
including from former Subcommittee Chairman Coble and current 
Subcommittee Ranking Member Johnson. I applaud their leadership 
on this issue during this and past Congresses.
    I also want to thank Chairman Bachus for holding today's 
hearing to further develop the record supporting the Mobile 
Workforce Act, and I look forward to hearing from our witnesses 
on this important measure.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Bachus. I thank you, Chairman.
    At this time, we have heard from Mr. Cicilline from Rhode 
Island, so at this time I recognize the Ranking Member from 
Georgia, Mr. Johnson, who is, as we referred to, one of the 
lead sponsors on this bill, along with Mr. Coble.
    Mr. Johnson. Thank you, Mr. Chairman. Let me apologize for 
being a tad late. Duty called elsewhere. But I want to thank 
you, Mr. Chairman, for bringing this bill before the 
Subcommittee for markup, and I also want to thank the Chairman 
of the full Committee for his support in this endeavor.
    The Mobile Workforce State Income Tax Simplification Act is 
an important bipartisan bill that will help workers across the 
country, and it will also help small and multi-state 
businesses. I am very familiar with this issue. I introduced 
this bill when I was a freshman in the 110th Congress, and 
again in the 111th Congress, and I am pleased to have 
introduced the bill in the last two Congresses with my 
colleague from North Carolina, Howard Coble.
    H.R. 1129 provides for a uniform and easily administrable 
law that will simplify the patchwork of existing inconsistent 
and confusing state rules. It would also reduce administrative 
costs to states and lessen compliance burdens on consumers.
    Take my home state of Georgia for an example. If an 
Atlanta-based employee of a New York company travels to 
headquarters on a business trip once a year, that employee 
would be subject to New York income tax even if the annual 
visit only lasts a day. However, if that employee travels to 
Maine, her trip would only be subject to income tax if her trip 
lasts more than 10 days. If she travels to New Mexico on 
business, she would only be subject to tax if she was in the 
state for more than 15 days.
    The bill that Chairman Coble and I have introduced would 
address this inequity by establishing a uniform law that would 
ensure the correct amount of tax is withheld and paid to the 
states without the undue burden of the current system. H.R. 
1129 would only subject employees who perform employment duties 
in a non-resident state if they work in that state for more 
than 30 calendar days.
    At a time when more and more Americans find themselves 
traveling for their job, this bill is a commonsense solution 
that helps workers who have to travel for work by simplifying 
their tax reporting requirements. Last Congress, this bill 
passed by a voice vote on the House floor. It would likely do 
so again today. So I urge that the Committee move this bill 
promptly so that it can come to the floor for a vote soon. This 
country's employees and businesses deserve quick action.
    Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Mr. Bachus. I thank the Ranking Member.
    We have a very distinguished panel today. I will start by 
first introducing our witnesses.
    Maureen Riehl is the Vice President of Government Affairs 
for the Council of State Taxation, or COST. Ms. Riehl is COST's 
primary link to both state and Federal election officials and 
is responsible for managing the day-to-day legislative agenda 
for COST, including working with her colleagues at state 
Chambers across the country.
    Prior to COST, Ms. Riehl was Vice President and Government 
Industrial Relations Counsel at the National Retail Federation 
for 12 years. She was responsible for NRF's national and multi-
state strategy development and policy implementation for issues 
affecting retailers in the state.
    Prior to joining the National Retail Federation in 1999, 
she held various state government relations positions for the 
International Franchise Association, the Grocery Manufacturers 
Association, and a coalition of advertising associates. She was 
also Legislative Policy and Constituency Affairs Director in 
the state legislature for members of both the Michigan House of 
Representatives and Michigan Senate.
    She received her B.A. from Michigan State University and 
her J.D. from Thomas Cooley Law School.
    Our next witness is Mr. Jeffrey Porter, Founder of Porter & 
Associates and Owner of Porter & Associates, a CPA firm in 
Huntington, West Virginia which concentrates on providing tax 
planning and business advisory services to small and medium-
sized businesses and individuals.
    Mr. Porter is active in the American Institute of Certified 
Public Accountants for over 20 years, currently serving as 
Chair of the Tax Executive Committee. He also has served on the 
Steering Committee for the American Institute of Certified 
Public Accountant's National Tax Conference for 20 years, and 
Chair of the Conference for over 10 years. He is also a member 
of the West Virginia Society of Certified Public Accountants.
    He is a frequent lecturer and has taught tax-related 
continuing education classes for a number of state CPA 
societies, national and local firms, and the American Institute 
of Certified Public Accountants' National Tax Conference.
    He received his B.A. from Marshall University and his 
Master's of Taxation from the University of Tulsa.
    I welcome you.
    Ms. Lori Brown is Director of Payroll at CACI 
International. She has over 18 years of experience in payroll 
tax compliance and payroll system conversions. Lori is an 
active member of the American Payroll Association and currently 
serves on the FTC Certification Board Payroll Hotline Committee 
National Speakers Bureau and the Certification Advisory Group. 
She has received citations of merit from the American Payroll 
Association each year since 2005.
    Ms. Brown has taught certified payroll professional and 
fundamental payroll certification exam preparation classes 
since 2004 at Prince George's Community College and currently 
at George Mason University.
    We welcome you to the Committee.
    And our final witness is Mr. Patrick Carter, who was 
appointed Director of the Delaware Division of Revenue in May 
2003. As the director, he oversees approximately 200 staff with 
the responsibility for the Administration, enforcement, and 
collection of personal and business income taxes for the State 
of Delaware. Prior to becoming director, Mr. Carter served as 
the Deputy Director of the Delaware Division of Revenue from 
1994 to 2001.
    Prior to joining the State of Delaware, Mr. Carter served 
as the Finance Director for the City of Wilmington, Delaware 
for 5 years, worked for J.P. Morgan Bank in Delaware, and 
Cooper & Lybrand in Philadelphia.
    He received his B.S. from the University of Delaware and 
his MBA from Indiana University.
    Did you come on Amtrak today?
    Mr. Carter. I did, Mr. Chairman.
    Mr. Bachus. All right, good.
    Okay. Now we will go to our witnesses' statements. Each of 
our witness' written statement will be entered into the record 
in its entirety. I ask that each witness summarize his or her 
testimony in 5 minutes or less. But if you are 30 seconds over, 
we are not going to ring a bell on you.
    To help you stay within the time--I never read that, so I 
am not going to. But there will be a yellow and red light, 
which is suggestive.
    At this time, Ms. Riehl, we will start with you, and then 
Mr. Porter, Ms. Brown, and Mr. Carter.

TESTIMONY OF MAUREEN B. RIEHL, ESQ., VICE PRESIDENT, GOVERNMENT 
 AFFAIRS, COUNCIL ON STATE TAXATION (COST), ON BEHALF OF COST 
               AND THE MOBILE WORKFORCE COALITION

    Ms. Riehl. Thank you, Chairman Bachus, Ranking Member 
Johnson, and Members of the Subcommittee. Again, I am Maureen 
Riehl, Vice President of Government Affairs for the Council on 
State Taxation. COST is a D.C.-based trade association which 
represents about 600 of the nation's largest employers on state 
and local tax issues.
    In addition to COST, I am also here representing the 263-
member mobile workforce coalition of organizations and 
companies in support of H.R. 1129.
    Mr. Chairman, I am going to begin by thanking Ranking 
Member Johnson and Mr. Howard Coble for introducing H.R. 1129, 
the ``Mobile Workforce State Income Tax Simplification Act.'' I 
also want to thank Members of this Subcommittee who are also 
co-sponsors of the legislation and thank those that are 
considering becoming co-sponsors.
    I appreciate the opportunity to share with you COST and the 
coalition's views on this important issue, and that is 
addressing state personal income taxes imposed on employees who 
travel away from their resident states for temporary work 
periods and associated tax withholding obligations of their 
employers.
    We urge adoption of H.R. 1129 for three main reasons. 
First, it is a widespread problem and one that Congress has 
addressed and fixed before.
    Secondly, H.R. 1129 is a simple and timely solution to this 
problem.
    And third, a Federal uniform standard is the appropriate 
and only solution to fix this problem.
    The problem is widespread and growing, and one that has 
been fixed by Congress in the past. Thousands of employees 
travel each day for work, and the majority of these are 
temporary trips where they return to their resident state. 
Employees who travel outside their home state for business 
purposes are subjected to onerous administrative burdens both 
at home and certainly if they have to file in a non-resident 
state, and that may be true legally even if they are there for 
only 1 day.
    The current patchwork of state laws affects employees of 
all kinds, those who travel for work. They could be small 
business employees, big business employees, utility and 
communications workers, retail employees, charity and non-
profit employees, state employees, union employees, Federal 
agency and Congressional staff, and the list goes on, with very 
few exceptions.
    Congress recognized this burden and has acted in the past 
to actually protect a mobile workforce, and has done so with 
Federal laws that are protecting for a 360-day time period 
officials or employees of airlines, motor carriers, railroads 
and military personnel. This is, of course, to ease the flow of 
interstate commerce and to reduce red tape for the employees of 
those types of companies.
    Clearly, a second reason we need H.R. 1129 is that it is a 
simple and timely solution. It establishes a simple and 
predictable 30-day threshold to protect workers who travel. 
After 8 years of negotiation between state organizations and 
the business community, we have a bill here that actually hits 
on all of these major points. It maintains state sovereignty. A 
state can still decide whether they even have a personal income 
tax. It does not apply to professional athletes, entertainers, 
or public figures. It has modified the threshold day from the 
start when Mr. Johnson first introduced it from 60 days down to 
30 days, and we have changed the definition of a non-resident 
day.
    And there is no tax avoidance under this bill. One hundred 
percent of the tax that is owed is still owed to the resident 
state. The only question is when a portion of that would go to 
a non-resident state.
    The third reason to pass H.R. 1129 is that a Federal 
uniform solution is the appropriate and only solution. Attempts 
by the states to self-regulate have fallen short. We worked 
with the Multi-State Tax Commission over several years, and 
they finally adopted a model statute back in 2011 that is 
patterned after H.R. 1129, but it has only been adopted in one 
state, North Dakota, and that does not even go into effect 
unless another state passes an identical law.
    There is just simply no example in history to suggest that 
a voluntary state-by-state approach will work. Florida cannot 
pass a law that will protect its residents when they travel to 
the State of New York. Such legislation faces some political 
challenges at the state level, and at least nine states that 
don't have a personal income tax are particularly at risk. 
Absent a uniform adoption, we would just simply have a new 
patchwork of state laws.
    Mr. Chairman, the only real question we confront here is 
whether this problem should be fixed state by state or fixed at 
the Congressional level. We believe the Congress is the right 
place to fix this problem, and we think H.R. 1129 is the proper 
solution.
    I am happy to answer any questions. Thank you.
    [The prepared statement of Ms. Riehl follows:]

    
    
        
                               __________
    Mr. Bachus. Thank you very much.
    Mr. Porter?

   TESTIMONY OF JEFFREY A. PORTER, CPA, FOUNDER AND OWNER OF 

  PORTER & ASSOCIATES, ON BEHALF OF THE AMERICAN INSTITUTE OF 

                  CERTIFIED PUBLIC ACCOUNTANTS

    Mr. Porter. Chairman Bachus, Ranking Member Johnson, and 
Members of the Subcommittee, thank you for the opportunity to 
testify today in support of H.R. 1129, the ``Mobile Workforce 
State Income Tax Simplification Act of 2013.'' My name is 
Jeffrey Porter. I am a CPA in Huntington, West Virginia and 
Chair of the Tax Executive Committee of the American Institute 
of Certified Public Accountants.
    The AICPA is the world's largest member association 
representing the accounting profession, with more than 394,000 
members in 128 countries.
    H.R. 1129 is an important step in state tax simplification. 
We believe the bill provides relief, which is long-overdue, 
from the current web of inconsistent state income tax and 
withholding rules on non-resident taxpayers that impact 
employers and employees.
    After taking into consideration the costs for processing 
non-resident tax returns with only a small amount of tax 
liability, we believe states receive a minimum benefit, if any, 
from the tax revenue that results from an employee filing a 
return for just a few days of work. We believe Congressmen 
Coble and Johnson have reached a good balance between the 
states' right to tax income from work performed within their 
borders and the needs of individuals and businesses to operate 
efficiently in this economic climate.
    The state tax rules applicable to non-residents are 
inconsistent and often bewildering to multi-state employers and 
employees. Many states tax income earned within the state even 
if the employee only works in the state for 1 day.
    Some of the states have a de minimis number of days or de 
minimis earnings amount before requiring employers to withhold 
tax on non-residents, or subjecting employees to tax. However, 
the minimum thresholds are not administered in a uniform 
manner. For example, a non-resident is subject to tax after 
working 59 days in Arizona, 15 days in New Mexico, and 14 days 
in Connecticut.
    Other states have a de minimis exemption based on the 
amount of wages earned, either in dollars or as a percent of 
total income. For example, employers are required to withhold 
in a non-resident state after an employee earns $1,500 in 
Wisconsin, $1,000 in Idaho, $800 in South Carolina, and $300 a 
quarter in Oklahoma. Some states have thresholds which are set 
at a state's personal exemption, or the standard deduction, or 
their filing threshold, which sometimes changes year by year.
    Some states exempt, and some do not exempt, from the 
withholding requirement the income earned from certain 
activities, including training, professional development, or 
attending meetings. Sometimes the exemption only covers 
withholding. They do not address the non-resident taxpayer's 
filing requirement or other tax liability.
    It is also important to note that approximately one-third 
of the states have entered into reciprocity agreements under 
which one border state agrees not to tax another state's 
residents, and vice versa. However, not all states have 
reciprocity agreements, and the agreements that exist are 
primarily geared toward non-resident employees who ordinarily 
commute a few miles a day to a particular adjoining state.
    The reciprocity rules normally do not apply to individuals 
who regularly travel greater distances. And because of this 
gap, I prepare a significant number of non-resident tax returns 
for individuals who must travel for work. For example, it is 
not unusual for construction workers to travel to a plant 
shutdown to work for only a few weeks. I also know electrical 
linemen who go from one natural disaster area to the next to 
restore power after hurricanes and floods. I have filed income 
tax returns in as many as 10 different states a year for one of 
these workers.
    Other everyday examples include a real estate developer's 
employee who travels to 20 states to visit prospective sites 
and spends less than a day in each state, or a store manager 
who attends a half-day regional meeting in an adjoining state, 
with some of these meetings occurring only twice a year. 
Another example is a car salesman who lives and primarily works 
in Ocean City, Maryland and occasionally has to drive a car to 
another dealer in Rehoboth Beach, Delaware.
    Unfortunately, employers need to understand and comply with 
all the variations from state to state, and some states have 
extremely complicated rules. For example, Georgia requires 
withholding when a non-resident employee works more than 23 
days in a calendar quarter in Georgia, or if 5 percent of their 
total income is earned in Georgia, or if the compensation for 
services in Georgia is more than $5,000. The employer must 
determine and calculate each of the three thresholds to 
determine when to withhold for each employee working 
occasionally in that state.
    The current situation of having to withhold and file many 
state non-resident tax returns for just a few days of work in 
various states is too complicated for both employers and 
employees. The AICPA urges this Committee to pass H.R. 1129 and 
help all the taxpayers in the country ease their non-resident 
state income tax withholding and compliance burdens. The bill 
provides national uniformity and a reasonable 30-day de minimis 
threshold. Therefore, the AICPA strongly supports H.R. 1129 and 
respectfully commends the co-sponsors of this legislation for 
the development of this reasonable and much needed bi-partisan 
legislation.
    Again, thank you for the opportunity to testify, and I 
would be happy to answer any questions you may have.

    [The prepared statement of Mr. Porter follows:]

    
    
    
                               __________

    Mr. Bachus. Thank you, Mr. Porter.
    Ms. Brown?

 TESTIMONY OF LORI BROWN, CPP, DIRECTOR OF DISBURSEMENTS, CACI 
    INTERNATIONAL, INC., ON BEHALF OF THE AMERICAN PAYROLL 
                          ASSOCIATION

    Ms. Brown. Thank you. Good afternoon. My name is Lori 
Brown, and I am speaking today on behalf of the American 
Payroll Association in favor of H.R. 1129, the ``Mobile 
Workforce State Income Tax Simplification Act.'' The APA is a 
non-profit professional organization with more than 20,000 
members. Most of our members are the payroll managers for their 
employers, and some of our members work for payroll service 
providers who in turn process the payrolls for another 1.5 
million employers.
    I have been a payroll professional for more than 20 years 
and have worked for several multi-state employers. Having 
worked in this environment, I have firsthand knowledge of the 
many challenges that employees and employers face in trying to 
manage their state and local income tax obligations.
    Often when employees cross state borders for work, the 
administrative burdens on employers and employees increase 
exponentially. I would like to explain some of the difficulties 
involved, which should help clarify why H.R. 1129 is so 
important to both business and workers. You already have my 
full written testimony, so I would like to focus on a couple of 
real-life examples.
    One day I was with a former employer. An employee came into 
my payroll office. He said, ``Hey, Lori, why is my paycheck 
short?'' Understand that we had 4,000 employees and I wasn't 
intimately aware of each employee's situation, so I did spend 
some time looking into it.
    Eventually I was able to tell him, ``John, you were working 
in New York last pay period, and so therefore we had to 
withhold taxes.'' He looked puzzled and he said, ``Well, I live 
in Virginia. Do you also withhold Virginia taxes?'' And I 
replied, ``Yes, that is what we have to do.''
    So now, not only was he puzzled but he was upset. John's 
job required that he travel quite a bit for us to different 
states, and we withheld non-resident taxes for each of those 
trips. None of his previous employers had done that.
    The following January, when we distributed Form W2s--those 
are the employee wage and tax statements--John's was six pages 
long. It is unusual for any worker's W2 to be more than a 
single page, yet John's was six. He wasn't happy about that. 
Like a lot of people, John was used to preparing his own tax 
returns. I told him, ``John, you may want to hire a tax 
professional.'' ``Lori, will the company pay for that?'' Well, 
that made me a little uncomfortable. The company did actually 
reimburse tax preparation services for our executives but not 
for employees at John's level. For good or bad, I hear that is 
somewhat common practice among employers.
    So we had an employee who had an interesting job and who 
was really good at it. He came to work for us and thought that 
he understood what he was getting into. The tax situation was a 
really rude surprise. In the end, he was frustrated and there 
was tension in the payroll office.
    I have a friend in the APA, Margaret, who I had told about 
John's situation, and Margaret said, ``Lori, not only would my 
company have paid for the tax service, but we would have 
actually paid for the extra taxes to pay to the other states 
just to keep him happy.'' Not every company is so generous, nor 
can they be, and some, especially small employers, don't feel 
they can afford that type of benefit.
    There are plenty of other costs that the employer also 
bears that employees like John don't realize. Through the years 
my employers have had to hire legal and tax counsel to guide us 
through some incredibly complicated situations. While I was 
with one company, we were sending consultants to meet with 
clients in Colorado. We didn't have offices there, but state 
rules required that we register as an employer. Because we 
didn't have a physical presence there, we had to hire a 
registered agent to act on our behalf. That was another 
unexpected expense for us.
    While we had Arizona residents on assignment in California, 
we also had to dedicate personnel to track the time that was 
worked and the wages that were earned there. We needed that 
data so that we could determine whether we needed to pay 
employment taxes weekly, quarterly, annually in California, as 
well as to know how much to withhold for each of those states.
    When the work was over, we also had to be sure to close the 
accounts, turn off the withholding for the additional state, 
and track the employee's next work assignment.
    H.R. 1129 would have eliminated a lot of trouble for the 
companies that I have worked for and the employees that I have 
paid. The 30-day safe harbor provided in the bill would have 
eased John's tax issues considerably since we wouldn't have had 
to withhold taxes for every one of his business trips, and he 
wouldn't have had to file tax returns for every state that he 
visited. He would have still had a complex return because he 
was in a few states longer than 30 days, but he would have been 
spared the extra work of filing a few extra tax returns just to 
get all those tax dollars returned to him.
    All too often, obeying the current laws create 
administrative burden on both employers and employees, but also 
for states, for no good reason. Often, these employees do not 
incur actual tax debts during their short stays. The safe 
harbor will also provide a framework within which more 
employers will be able to comply. The law will provide clarity 
through a uniform rule that will eliminate much of the 
confusion created by the current patchwork of laws.
    Thank you for allowing me the time to speak to you. Along 
with my colleagues at the American Payroll Association, my 
fellow panelists, I look forward to watching this important 
legislation pass.

    [The prepared statement of Ms. Brown follows:]

    
    
                                   __________

    Mr. Bachus. Thank you, Ms. Brown.
    Mr. Carter?

TESTIMONY OF PATRICK CARTER, DIRECTOR, DIVISION OF REVENUE FOR 
   THE STATE OF DELAWARE, ON BEHALF OF THE FEDERATION OF TAx 
                         ADMINISTRATORS

    Mr. Carter. Chairman Bachus, Ranking Member Johnson, and 
Committee Members, the Federation of Tax Administrators 
appreciates this opportunity to appear before you on H.R. 1129, 
the ``Mobile Workforce State Income Tax Simplification Act of 
2013.'' The Federation of Tax Administrators is an association 
of the principal tax and revenue collection agencies in each of 
the 50 states, the District of Columbia, and the cities of New 
York and Philadelphia.
    The FTA has long opposed the Mobile Workforce Act as 
currently drafted because we believe that it will interfere 
with the states' ability to impose and enforce state income 
taxes and will lead to additional tax evasion and a loss of 
revenue to those states.
    Forty-one states and the District of Columbia, the cities 
of New York and Philadelphia, and a number of other local 
governments impose income tax on the individuals who perform 
services as employees in their states whether or not those 
individuals are residents. In this way, the states and the 
Federal Government impose income tax in the same way. This 
method of taxing income at the source where it is earned is 
common internationally as well. If this was not the case, 
individuals could avail themselves of a country or a state's 
economic marketplace without paying for that tax benefit, and 
could do so in competition with the state's residents and in-
state businesses.
    The 30-day threshold, while less than proposed in the 
original legislation, still amounts to a full 6 weeks of work, 
which is greater than most states with statutory thresholds as 
currently allowed and described in much of this testimony. This 
is a significant departure from taxing income at the source.
    Most importantly, this bill as currently drafted may have a 
significant negative impact on the states. The State of New 
York alone estimates that it would experience a revenue loss in 
excess of $100 million annually as a result of H.R. 1129. While 
supporters claim that for states other than New York H.R. 1129 
is neutral, the states do not believe this will be the case for 
a number of reasons.
    First, states already experience concerted tax avoidance by 
taxpayers seeking to source income to one of the nine states 
that do not impose a broad-based individual income tax.
    Secondly, while states, like the Federal Government, 
require employer recordkeeping, reporting and withholding of 
tax from employee wages as the primary mechanism to ensure tax 
compliance, H.R. 1129 limits states' ability to require 
employer recordkeeping, reporting and withholding. Studies done 
over the years by the IRS and the states show that where there 
is no information reporting or withholding, taxes can be under-
reported by over 50 percent.
    H.R. 1129 undercuts those important recordkeeping, 
reporting and withholding mechanisms that the states need and 
depend upon to enforce their income taxes by allowing employers 
to rely not on their own records but on the estimates made by 
an employee a year in advance as to where the employee expects 
to be working for the coming year. While employers may not know 
where their employees are every day of the year, I find it 
incredulous that the employee is better informed of where the 
employer will be sending them during an entire year in the 
future than the employer is themselves.
    Thirdly, while H.R. 1129 excludes from its provisions 
certain individuals--professional athletes, professional 
entertainers and public figures--it does not exclude highly-
compensated individuals. In effect, it does not matter how much 
an individual might be compensated for services performed in a 
state. This is important because many highly-compensated 
individuals travel to a location for a short period of time due 
to the nature of their work and earn significant revenue for 
their employer and themselves.
    Examples in Delaware of very highly-compensated non-
resident attorneys representing large corporations before 
Delaware's Chancery Court on business matters.
    Lastly, H.R. 1129 contains provisions and terms that are 
ambiguous and poorly defined, and as a result will ultimately 
lead to differences in the ways the states interpret and apply 
these provisions. In my experience, unless provisions are more 
properly defined, it will lead to more dispute and litigation 
and not less.
    Despite the fact that the FTA believes that the states 
currently impose by statute or regulatory policy appropriate de 
minimis rules and do not seek to enforce withholding or tax on 
limited activities of employees in a state, still we have 
worked with the Committee staff and industry representatives 
for almost a decade on this legislation. Seeking a balanced 
solution to tax enforcement concerns and business compliance 
requirements, the states have proposed a solution to be enacted 
by state lawmakers which we believe will be preferable because 
it would allow states to ensure and retain the ability to audit 
and verify the withholding as correct using employer records, 
while a threshold would limit the imposition of withholding on 
tax for employees traveling into the state for less than 20 
days. This solution may not have had the support needed to make 
it a reality because, in part, industry groups have focused 
their efforts instead on this Federal legislation.
    Therefore, we continue to ask the Members of this Committee 
to consider the needs of tax administrators to be able to make 
sure that taxes due are paid and balance the interests of the 
citizens of your state with those of the business community.
    Thank you, Mr. Chairman, Ranking Member Johnson, Committee 
Members.
    [The prepared statement of Mr. Carter follows:]

    
    
    
                               __________
    Mr. Bachus. Thank you, Mr. Carter.
    At this time I recognize the gentleman from Pennsylvania, 
Mr. Marino, for 5 minutes of questions.
    Mr. Marino. Thank you, Chairman.
    I have three Committee hearings going on simultaneously, so 
I am going to try and get to each one, but thank you.
    Mr. Bachus. Many Members of the Judiciary do indeed have 
two hearings going on simultaneously.
    Mr. Marino. Three.
    Mr. Bachus. Three.
    Mr. Marino. All right, let's get right to the meat of this.
    Does anyone on the panel working in different states get 
paid by a company in one state? Anyone on the panel make any of 
these moves to other states and work? Okay. So that means that 
you are not paying multiple taxes to multiple states; correct?
    Ms. Brown. Correct.
    Mr. Marino. No one is paying a state tax in several states. 
You are all paying in one state.
    Mr. Porter. Correct.
    Mr. Marino. Okay. I guess let's start with Mr. Carter. Can 
you give me any reason why it is fair to an employee who lives 
and primarily works in one state but travels to another state 
for whatever period of time and pay a tax on that? And let me 
preface that--let me follow up with that question by my 
position.
    I am sick and tired of hearing the Federal Government 
primarily and the states say we have to increase revenues, and 
it is always on the backs of hard-working, tax-paying 
Americans, okay? It is about time that the Federal Government, 
especially the Federal Government, and states start cleaning 
their act up.
    I worked in industry. I worked in a factory until I was 30 
years old, started sweeping floors, and I know how hard it is 
to work in a factory. I know that there are no wealthy people 
working in a factory, even people who have to travel to another 
state, and let me give you an example.
    I was in the baking industry, and when we would build 
factories, employees from the companies that built the 
machinery from other states would come into our state and put 
that machinery together. They weren't millionaires by any 
stretch of the imagination, and they certainly were not well 
off. They were making ends meet, just like I did. But 
unfortunately for them, they had to leave their families and go 
to another state.
    Now, can anyone--but we will start with Mr. Carter--tell me 
why it is fair for a person to pay multiple states?
    The Federal Government and the states better get their acts 
together. They had better start decreasing the size of 
government. They had better start becoming more effective and 
more efficient in running governments, because if that were the 
way my business was run when I was in industry, it would have 
been shut down, and those elected, those appointed would have 
been fired a long time ago.
    Fewer people, more responsibility, and I am tired of 
hearing more revenue on the backs of hard-working, tax-paying 
Americans.
    Mr. Carter?
    Mr. Carter. Committee Member, the primary reason why states 
believe or I believe--let me say I believe--that a non-resident 
individual should be subject to taxation in that state where 
they are engaged in business activities is they are availing 
themselves of the assets of that state, the roadways. If they 
get injured, the court system. If they are accosted by someone, 
they use the police force. All that is funded by that state 
while they are working.
    Mr. Marino. Okay. Now I am going to bring out my 
prosecutorial experience. I was a prosecutor for 18 years.
    I am driving through State x, driving through it, and I am 
using the road, and there are no tolls. Should I be paying some 
type of tax for using it? Don't I do that with the Federal 
Government? And aren't many roads in states funded by the 
Federal Government? Number one.
    Number two, we have a Constitutional right to be protected 
in this country by law enforcement no matter where we go.
    So you are not going to sell me on why a state should be 
able to tax someone. Maybe the state has to get its act 
together and start running efficiently like my business ran.
    Anyone else?
    Mr. Porter. Well, I will just concur. I see typically this 
in my practice. I represent contractors and construction 
companies, and also construction workers, and I can tell you 
that it creates a great deal of complexity within the company 
systems, it creates a great deal of complexity for the 
individuals as they have to file their tax returns. At the end 
of the day, they usually get credits back to offset, and the 
net effect for them is many times minimal, but it does create 
additional complexity.
    Mr. Marino. Well, let's step aside of the complexity and 
the ridiculous paperwork that government is known for. It is 
simply not fair to hit someone two times, three times, four 
times because they happen to work in that state.
    That individual, Mr. Carter, with all due respect--I am not 
aiming this at you, sir; please don't take it personally. But I 
am just as passionate on this side of it as you are on your 
side of it. But that individual is providing a great service 
for that state also.
    Ms. Brown?
    Ms. Brown. Agree, agree. And I would just like to add on to 
that, that generally speaking we are not talking about the 
executives. Those aren't the ones that are walking into our 
offices with the questions and with the confusion. Most of our 
workforce do not understand these laws. So I am forced to 
explain this to them and explain to them why New York is 
different from California, and California is different from the 
next to the next, and all they want to do is they just want to 
do a good job and get the paycheck that they expect to receive.
    Mr. Marino. And it is not the person walking into your 
office who is a top executive where that tax may be being paid 
for by the company. It is an individual that primarily is 
living from paycheck to paycheck, trying to raise a family and 
send kids to college. Believe me, I have been there, I know 
what it is like. I do not agree with this whatsoever of being 
taxed by multiple states. One state, where you live, that is 
it. Thank you.
    Ms. Brown. Agree.
    Mr. Collins [presiding]. The Chair now recognizes the 
gentleman from Georgia, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Carter, do you agree that there is a problem that this 
bill addresses?
    Mr. Carter. Ranking Member, personally I do think it is 
very difficult for employers to keep track of some employees, 
especially when there are states such as Delaware where the de 
minimis number of days is 1 day. An example I use and that was 
mentioned is utilities. There may be, especially here on the 
East Coast as utility companies tend to be regional, where one 
of the employees of the utility may be working in a state which 
is their primary area of responsibility, and they are sent into 
Delaware for a day or a week to do work there. The manager of 
the operation isn't a tax expert, probably not talking to the 
payroll department all the time, and they are totally unaware 
of the different laws in the different states. So I do 
recognize that there is an issue here.
    I do think that 20 days, a 20-day period, which is a full 
month of work, as a bright-line test that you can send to all 
of your employees and tell them if they are working somewhere 
for more than 20 days, check with the payroll department to see 
if you are subject to tax, is a very bright-line test that can 
be used nationally.
    Mr. Johnson. So is 30 days.
    Mr. Carter. So is 365. I do think 20 days is a lot of time 
to be working in your state, and I mentioned to Representative 
Marino that they are availing themselves of the state 
resources, and they should be, in my belief, subject to 
taxation in that state.
    Mr. Johnson. All right.
    Ms. Brown?
    Ms. Brown. Thirty days is all-inclusive. So it is not 
business days. It doesn't exclude certain days. So it is really 
important to home in on the fact that the 30 days is 30 days 
from when that person steps into the state for 30 days forward.
    Mr. Johnson. Mr. Carter, if that is what the legislation 
says, do you still have a problem with that?
    Mr. Carter. As I stated in my testimony, I have issues with 
some of the definitions of how it would work. I think what you 
would see happening, because I don't think this is as clearly 
defined as Ms. Brown, at least in our mind, that you would see 
regulations issued by individuals such as myself, tax 
commissioners, trying to find that 30-day period.
    What happens if someone comes in on January 1st and then 
they don't come back until August 1st? That is a 30-day period 
from start to finish, and they have only been in our state for 
2 days.
    Ms. Riehl. Congressman Johnson?
    Mr. Johnson. Ms. Riehl?
    Ms. Riehl. I just want to make clear that that has been a 
long-established change to the legislation from when you 
originally introduced it. The definition of a non-resident day 
is any fraction of any day. So that has been long established. 
There was actually a discussion that occurred with Committee 
staff between the hearing in the last Congress and the move to 
the full floor, one of the clarifications that was made. When 
we say a day, it is any fraction of a non-resident day.
    Mr. Johnson. All right.
    Anything else, Mr. Carter?
    Mr. Carter. No, Ranking Member.
    Mr. Johnson. All right. Thank you.
    Anyone else have anything to add?
    [No response.]
    Mr. Johnson. I think you all have been quite explicit in 
your reasons for supporting the bill, and also for opposing it. 
So I would have no further questions, and I would yield back 
the remainder of my time.
    Mr. Collins. Ms. DelBene?
    Ms. DelBene. Thank you, Mr. Chair.
    I come from a state, Washington State, where we don't have 
a state income tax. Many of our state's residents travel 
frequently for business and currently face the confusing 
patchwork that many of you described of non-resident state 
income tax filing rules. Despite living in a state with no 
income tax, residents of my state may be legally required to 
file an income tax return in every other state in which they 
travel for business, in some cases even if they were there for 
only 1 day, as many of you have talked about.
    I do think Congress can play a role in alleviating the 
difficulties facing these individuals and families in our 
current system, and I believe that we should, and that is why I 
am a co-sponsor of this legislation.
    That said, I am very mindful of the concerns being raised 
regarding state sovereignty and potential impacts to state 
revenue, and I am pleased that supporters of the bill have been 
open to changing the bill over the years to address these 
concerns.
    I wanted to ask in particular Mr. Porter, your testimony 
discussed the variety of businesses, large and small, who are 
impacted by the current state of affairs. Particularly for 
small businesses, and we have talked about this a little bit, 
can you talk about the compliance burden on these businesses? 
For example, in what number of states are non-resident 
employees subject to tax withholding on the first day of 
travel, or a small business that doesn't have much employee 
travel? How much are their expenses in terms of preparing the 
paperwork necessary to comply with these rules, versus the 
actual taxes that are paid?
    Mr. Porter. Sure. I mean, when you are thinking about small 
business, you are, first off, looking at businesses that 
traditionally don't have a large staff, they don't have a large 
payroll department. So many times, at least what I see in my 
clients' practices, you have one person that does the payroll. 
So they are doing payroll, and they are probably doing 
payables, and they are doing a lot of other types of things.
    So it does become overwhelming to track. In particular, I 
think in my practice I had a construction client that many 
times would take a job in a power plant that did a shutdown for 
two or 3 weeks, and they may have 500 or 600 employees that 
would suddenly go up and that would be working through the 
union hall at that one particular site, and they are going to 
have to gear up and do that and get all the multi-state issues 
going, and it becomes very problematic.
    So the alternative is to out-source it, which is one 
alternative to do. But many out-sourcing payroll entities, they 
don't necessarily track things by days. They are more inclined 
to track by pay periods. So it is very confusing. It is very 
challenging, and it is also very challenging for those 
employees who are in those environments and then go to people 
like me to fill out their tax returns at the end of the year.
    I think I used in my testimony the example of an electrical 
lineman. It is not unusual as you hear thunderstorms, like we 
are having today, and they move through the area and they knock 
out power, then these gentlemen and ladies will come in and do 
that work and find that they have to file a tax return in this 
area. Then they have to file a tax return in this area for the 
next storm.
    So it is very challenging, and it is very confusing for 
them.
    Ms. DelBene. How many states start withholding after the 
first day? Do any of you know the answer?
    Ms. Riehl. The majority.
    Ms. DelBene. And I assume for a lot of small businesses 
where they might only have a couple of employees who might be 
impacted by this, the cost of administration in terms of filing 
is much more than any taxes that are paid to states.
    Ms. Brown, you are shaking your head?
    Ms. Brown. Yes, I agree.
    Ms. DelBene. Do you have an idea of what those costs might 
be relative to----
    Ms. Brown. So, for instance, part of my testimony is that I 
have worked with an employer who had about 1,400 employees. 
They were in about nine states. We had to hire outside legal 
counsel, outside tax counsel. We had to hire registered agents 
in the states. We had to pay for tax preparation services for 
the number of employees that were affected.
    And on top of all of that, I think that a priceless piece 
of it is the employee morale and the employer-employee 
relationship. We are being compliant. Maybe companies that they 
worked for previously had not been or didn't have the resources 
available in order to withhold properly. So then we are looked 
at as the bad guy almost. So I think that is a real priceless 
cost that the employer takes.
    Ms. DelBene. Ms. Riehl, you talked about voluntary efforts 
for voluntary compliance in the states and that those haven't 
taken hold. I wonder, Mr. Carter, if you think that there is a 
potential to move that forward since it looks like those 
efforts haven't really gained any traction so far.
    Mr. Carter. Representative DelBene, I think it is a 
challenge personally. It was mentioned that North Dakota has 
adopted model legislation, but only with the caveat that other 
states will adopt model legislation. If I use my state, 
Delaware, as an example, we do not have any reciprocal 
agreements with the surrounding states of Pennsylvania, New 
Jersey and Maryland. If we were to adopt this type of 
legislation for our state and the other states did not adopt it 
simultaneously, we definitely would see a loss of revenue to 
those non-resident employees who are working in Delaware, and 
that is the challenge, to try to at the same time get the 
surrounding states to adopt the legislation at the state level.
    Ms. DelBene. So it sounds like you are not feeling 
confident that there is going to be a voluntary solution.
    Mr. Carter. I am not.
    Ms. DelBene. Okay.
    Thanks to all of you for being here. I appreciate it, and I 
yield back.
    Mr. Collins. I thank the gentle lady.
    I tell you what. In light of votes that are going on, I am 
going to begin my question series, and I have just a few 
questions, and we are going to take a short recess for that. So 
anybody else who wants to go ahead and do their vote, we will 
pick back up--either myself or the Chairman will pick back up 
when we get back.
    So, with that public service announcement, then I have a 
couple of questions.
    Ms. Riehl and Mr. Porter, I have a hypothetical, and this 
is something that if things come along and they are just--
frankly, something about this whole situation just strikes me 
wrong. Mr. Carter, we have a gentleman's disagreement on this, 
but I understand. I come from a southern state, worked on the 
state legislature. I get the fact that states and cities are 
becoming tax starved. I get that.
    But this is just a hypothetical, and it goes a little bit 
to your employment duties, wording classification, which I did 
read your written testimony. I work for the University of 
Georgia, or I worked for, as I used to in a previous time, I 
worked for a church. I take a leave of absence, which is not a 
leave of absence but a sabbatical, which happens in higher 
education but also in churches or other organizations as well.
    I go to a state that begins supposedly on Day 1 collection. 
I go there to research a book that I am going to write, to 
pray, to meditate, to just get away for 4 months.
    Under this bill, would what I am doing classify as a 
vacation or employment? It is a hypothetical. I am a lawyer, 
too, so this is----
    Ms. Riehl. I think in that scenario, Congressman, that 
sabbatical which is paid for would be treated just like it 
would if you were on paid vacation. But if you do work on a 
vacation day and that somehow is tracked or traced by yourself 
in recordkeeping, a lot of that has to do with how you would 
account for that time. If it is counted against your time off 
of work, or if it is not counted against your time off of work, 
you are still being paid.
    Mr. Collins. Most sabbaticals would not be counted against 
my time off of work. It would just be counted as a time to go 
take time off, to read, to do stuff that doesn't apply to my 
job.
    Ms. Riehl. Exactly.
    Mr. Collins. Mr. Porter, do you have anything to add? 
Because I have a follow-up as well.
    Well, the follow-up I have here is what is to keep--Mr. 
Carter or Ms. Brown, jump in here whenever you want. What is to 
keep states, then, from saying that any time I go into a state 
for a vacation in which I take a call from work, that is a 
taxable day?
    Ms. Riehl. Technically, it is.
    Ms. Brown. Technically, it is.
    Mr. Collins. That is a bunch of bull. [Laughter.]
    We have another term for it in Northeast Georgia, but I am 
among mixed company and I am a southern gentleman. My mother 
would shoot me.
    But I think the issue here is that we are really beginning 
to see an issue here that is very disturbing. I appreciate the 
authors' intent here, and I think it is something that needs to 
move forward in looking at how we deal with this. But there are 
some issues on when this applies and how this applies.
    Frankly, the Federal Government is a little bit 
hypocritical about this because I am in the military as well. 
Georgia is my state of residence. I can PCS anywhere in the 
world or any other place in the country and I am going to be 
taxed in Georgia. And now the Federal Government is coming in 
to say basically states who want to tax you to death, you are 
going to get your taxes no matter where you are claiming 
residency, and I think the 30 days to me is a little, frankly, 
arbitrary in a sense, and I think we are working on it. I know 
my good friend from Georgia has worked on this very hard.
    Is there a better way to look at this? Two questions. Does 
the Federal Government have to jump in on this? Number one. And 
number two, is there a better way to sort of define some of the 
problems and issues that I brought up?
    Ms. Riehl. I would say that the Federal Government has to 
act here, and Congress has the authority to do it, because of 
the nine states that do not have a personal income tax. They 
cannot pass a law in the State of Washington that would protect 
their employees when they travel to Georgia. Only Congress can 
do that. And by setting a new standard of 30 days when you 
cross state lines in any one given state, we just think that is 
a new starting point. It doesn't bar the state from expecting 
to have a portion of your earned income paid there, but only 
after 30 days in a calendar year.
    In this instance, when personal income tax laws were 
passed, people didn't travel beyond their home city or county, 
but that is just not common these days. This workforce that we 
all are in right now is much more mobile, and as Lori described 
in her testimony, it is middle management, it is folks at entry 
level that are moving around for work, and they are being 
subjected to this.
    Mr. Collins. Again, the concern here is that if we go ahead 
with this step--I am looking down the road, and my hypothetical 
sort of highlighted this--we have now condoned this and we have 
set up a standard, and then maybe through vague terms or 
different states deciding we need more money, that phone call 
back from the office on a vacation now becomes a taxable day, 
and I don't think that is a good move.
    Ms. Riehl. We could certainly move to no non-resident 
implications for tax where all you do is pay that to your home 
state 100 percent of the time. And certainly residents of 
states that don't have a personal income tax would not owe a 
penny to a state regardless of how much time they spent there.
    Mr. Collins. And I know, Mr. Carter, you brought that up, 
saying that is not fair. Well, frankly, every state has to 
determine how they want to collect income, and if they choose 
not to have an income tax, then that is more the reason they 
can--that is a state choice that they have made, and if another 
state doesn't like it, then they can go to a state non-income 
tax as well.
    Mr. Carter. That is a potential option, but in reality the 
states are structured to raise their income for the way they 
are. As you just said, your State of Georgia is a personal 
income tax and a sales tax. Delaware has no sales tax but a 
little bit higher personal income tax.
    Mr. Collins. I think what we have raised here is just a lot 
of questions that could go on.
    We have to go vote. So, at this point the Committee will 
stand in recess, subject to the call of the Chair.
    [Recess.]
    Mr. Bachus [presiding]. The Subcommittee will come to 
order.
    I yield myself 5 minutes for questions.
    Before we left, I was listening to an exchange between Mr. 
Collins and Mr. Carter in which you were talking about how 
unfair it was if someone was in a state utilizing their 
services that they should pay taxes to that jurisdiction 
because that jurisdiction was providing services, and you were 
including all taxes, income taxes.
    I was thinking about, just hypothetically, if I went to New 
York City, which I did Sunday, and spoke, but let's just say I 
went there for a month or 2 weeks to work. When I got to the 
airport, I would pay an airport tax. When I got in a cab, there 
is a tax there. When I got to the hotel, I would pay a pretty 
steep lodging tax. So my shelter would be as much as--and I 
don't know what the tax is on hotel and motel rooms. But if I 
am not from there, I am going to be staying at a hotel or a 
motel, so I am going to be paying a pretty steep tax there. 
Anything I buy, I am going to pay a sales tax.
    I did ask my staff to print out--I would pay a 4.5 percent 
New York State sales tax and a 4 percent New York sales tax. 
The only exemption would be if I bought a pair of shoes.
    Now, the whole time I am there, my five children would be 
in school in Alabama. I would have a home in Alabama. My 
garbage would be picked up in Alabama. If there was a fire at 
the hotel, I don't own the hotel or motel in New York. So if 
there were fire-fighting services, that is provided. That 
benefits--I mean, a hotel owner pays that, but I am also paying 
because I am paying a lodging tax. But back home, they are 
getting none of that. They are providing free police 
protection, fire protection, sanitation, garbage pickup.
    But more importantly, they are paying for the education of 
my children, which is a major expense. But if my income tax is 
going to New York and my children are being paid for teachers 
in Alabama, that just doesn't seem fair. I hadn't really 
thought about it, but if anybody had a claim, even when I am in 
New York, I am paying a lot of taxes in New York.
    If you take the income tax and pay that, too, I am paying 
almost nothing to Alabama, but it is 80 percent of what I am 
benefitting from.
    We talk about emergency workers. One of my questions I 
think kind of fits right in. Natural disasters such as flood, 
fire, earthquake, tornado, wind storms affect thousands of 
people every year. According to FEMA, since 2010 we have 
averaged 87 major emergency declared disasters every year. At 
times, disaster impact states rely on a workforce, plus 
volunteers too, from all over the country to help restore 
critical infrastructure such as telecommunication networks and 
electrical grids. It doesn't say it here, but they also come in 
and provide claims processing to reimburse people for their 
lost houses, lost cars, other insurable loss. We want to 
encourage that. I don't really want to deal with somebody over 
the Internet, and I am afraid that if this workforce is in any 
way discouraged from coming in because, all of a sudden, all 
their taxes go to the state, and they are there, even as 
volunteers--you know, I thought about this. When they come in 
as volunteers, the state is getting lodging tax, they are 
getting when they buy food. They are getting paid for that. 
Their gasoline. They are paying.
    You mentioned roads specifically. Let me tell you, if they 
buy gas or they go into an airport, believe you me, they are 
paying. So I am not sure that, the more you think about that, 
the more--you know, police come in from other states, fire 
responders, fire trucks. They loan equipment to them. They gas 
up. But they are there for the sole benefit of those people who 
are hit by whether it is Katrina or whatever, 9/11.
    But I guess the question that the Committee prepared I 
think is a good one. How do state and local taxes impact the 
efforts, and how will this act help Good Samaritans who come 
into a state to help in case of a disaster, which is probably 
the biggest influx by far of people?
    Mr. Carter?
    Mr. Carter. Mr. Chairman, the Delaware General Assembly 
actually recently adopted legislation that exempted emergency 
workers in the State of Delaware for a short period of time. I 
believe the period is for 60 days if either a state or national 
disaster is declared.
    Mr. Bachus. Would that include utility workers?
    Mr. Carter. That includes utility workers. Yes, it does.
    Mr. Bachus. How about in New York?
    Mr. Carter. There are eight states that have adopted this 
legislation. I was just speaking to----
    Mr. Bachus. And those emergency workers still pay their 
lodging tax.
    Mr. Carter. They would still be, or the company would pay, 
the utility company. Whether the local utility company 
reimburses them----
    Mr. Bachus. Somebody would----
    Mr. Carter. Somebody would, yes.
    Mr. Bachus. Those are pretty steep.
    Mr. Carter. It can be in some states, yes.
    Mr. Bachus. I don't know what the New York one is, but all 
sorts of taxes.
    My time has expired.
    Mr. Carter. On the speaking occasions----
    Mr. Bachus. But do you see my point?
    Mr. Carter. I do see your points. But I will say to the 
speaking engagement, if you were speaking in New York----
    Mr. Bachus. Oh, I am not talking about speaking. That was a 
poor example.
    Mr. Carter. Okay.
    Mr. Bachus. What I am thinking about, somebody comes in to 
work for 2 weeks or 3 weeks. I mean, they are going to pay a 
lot of taxes, but their home state is still providing every 
service that they benefit. I mean, everything is still--the 
fire service isn't suspended, and most of them have family at 
home. But even if they are alone, somebody is protecting that 
house. Their children, the schools are still being paid for. 
And if their income tax goes to New York, while I am out of 
state, my home state is going to lose revenue.
    I think that is where you have a lodging tax. I think that 
is maybe why you have a sales tax. That is why, when you come 
to an airport--there is even a tourist tax now. If you look at 
a hotel bill now, there are all kinds of taxes on there.
    But I am just telling you that I think there are two sides 
to that story. I understand your concern. Your concern was 
fairness. But I am actually saying I think to collect that 
income tax when they are collecting a 10 percent lodging tax 
and all your gasoline, all your food, anything you buy, I think 
they are getting a pretty good deal. And you are providing jobs 
when you are coming in.
    But I just wanted you to think about that. And education is 
still 50 percent of expenses, I think. It is by far the biggest 
expense. And income tax in some states, that is their major 
source. In some states it is not.
    Mr. Johnson?
    Mr. Johnson. If I may----
    Mr. Bachus. Mr. Jeffries. I am sorry. But, go ahead.
    Mr. Johnson. Yes, I just want to clear the air. This is not 
a revenue raising bill. This is a bill to bring some uniformity 
to the 50 states insofar as when income taxes can be levied, 
and the legislation calls for a 30-day period that must be 
worked, 30 days, and a day is an increment of activity on a 
particular day. So if more than 30 days, then the ability of a 
state to collect an income tax from that traveler who is 
working in the state becomes effective, but not until we reach 
that 30-day threshold.
    So the reason for this legislation is to create some 
uniformity and to enable businesses and individuals who 
actually owe the taxes to have some certainty, as opposed to a 
hodge-podge of 50 possibilities that they have to pay money to 
research as a consumer to find out where they are liable for 
income taxes, or for a business, a small business having to 
track all 50 states insofar as when income taxes have to be 
collected in accordance with that particular state's laws. That 
is very burdensome, and it puts us at a competitive 
disadvantage as a nation with respect to our businesses.
    So this is to not create any kind of double taxation or 
deprive any particular state of the ability to collect income 
tax.
    So I just wanted to make those points, Mr. Chairman, and I 
thank you.
    Mr. Bachus. Mr. Jeffries is recognized for 5 minutes for 
questions.
    Mr. Jeffries. I appreciate the return to regular order as I 
did have some issues that I wanted to be able to address.
    I don't doubt that this legislation has been introduced in 
good faith by individuals who are supporting it, both sides of 
the aisle, although it does seem to be Beat Up On New York Day. 
So I thought it would be very important to clear up some of the 
factual inaccuracies that I think were presented, not in bad 
faith, of course.
    Now, Mr. Porter, would you agree that Federalism is an 
important part of the constitutional construct that we have in 
this great republic of ours?
    Mr. Porter. Certainly.
    Mr. Jeffries. And is part of the premise of Federalism that 
each individual state has the capacity to determine for itself 
the best form of taxation for that particular jurisdiction? 
Correct?
    Mr. Porter. Certainly, within limits, yes.
    Mr. Jeffries. So isn't it reasonable to conclude that the 
legislation that is before us is inconsistent with the notions 
of Federalism often put forth by people here in the country and 
certainly the Congress who talk a lot about individual states' 
rights?
    Mr. Porter. Well, I think in this particular case, as we 
talked about a little bit earlier, there have been movements to 
try to get the states as individual states to enact some type 
of legislation that would help in this particular issue, but 
that, I think as we said earlier, that hasn't happened. So the 
only way to get some type of uniformity would be for the 
Federal Government to provide that uniformity.
    Mr. Jeffries. Now, do you think what New York City and New 
York State have done is fundamentally unfair in terms of the 
taxation system that they have put forth?
    Mr. Porter. I can't speak that much about the State of New 
York or the City of New York because I am not there. Sorry.
    Mr. Jeffries. Okay. Well, I think it is clear, and I 
believe it was Mr. Carter who testified that New York State 
would lose about $100 million to $120 million. Is that correct?
    Mr. Carter. That is correct, with the legislation that is 
currently drafted.
    Mr. Jeffries. Okay. Now let me go back to Mr. Porter. 
Picking up on a theme that was raised earlier, tax revenue pays 
in part for police protection; correct?
    Mr. Porter. Yes.
    Mr. Jeffries. And when non-residents are temporarily in New 
York, they benefit from that police protection; true?
    Mr. Porter. Correct.
    Mr. Jeffries. And isn't it the case that New York City as a 
center of commerce for the country, if not the world, is 
uniquely positioned in that it draws people from all over the 
country, from different regions--in fact, from different parts 
of the world--to work in New York City at a disproportionately 
higher rate than may exist in other parts of the country? Is 
that a fair characterization?
    Mr. Porter. Are you stating that wages in New York City are 
going to be higher than wages in other parts of the country?
    Mr. Jeffries. People temporarily find themselves deployed 
for work reasons in New York City in numbers greater than in 
probably any other part of the country because New York City is 
a center of commerce. Is that a fair characterization?
    Mr. Porter. I would agree with that, yes.
    Mr. Jeffries. So there is a higher burden that is placed on 
New York City in terms of police protection than in any other 
part of the country because of the high number of workers 
temporarily residing there. Is that fair to say?
    Mr. Porter. I think that is true and I would agree with 
that. But I think also, as was mentioned earlier, when I am in 
New York City I am paying taxes when I fly in, I am paying 
airport taxes, I am paying hotel taxes, I am paying food taxes 
that, as a guy from West Virginia would think, are higher than 
what I would be paying in West Virginia. So I understand that I 
am paying----
    Mr. Jeffries. Let me reclaim my time. I do appreciate that, 
but my time is limited. And the same would apply for fire 
safety protection; correct? That it would benefit non-residents 
temporarily working there; true?
    Mr. Porter. True.
    Mr. Jeffries. The same would apply to sanitation services; 
correct?
    Mr. Porter. Correct.
    Mr. Jeffries. The same would apply to the extensive New 
York City mass transportation system; correct?
    Mr. Porter. Correct.
    Mr. Jeffries. Now, in terms of this general, overall point, 
and this has really bothered me since my time here in Congress, 
and I only have a little bit of a moment to express it, you 
have states like New York, California, Illinois, Connecticut 
that regularly send, in some instances, tens of billions of 
dollars more to the Federal Government than we get back in 
return. And in the most recent study that I have seen, New York 
State sent $23 billion more to the Federal Government than we 
get back in return.
    Is that fair, sir?
    Mr. Porter. I guess that would depend upon your 
characterization of--again, I think you are talking about 
Federal revenues as opposed to the state issues, which is----
    Mr. Jeffries. And I am talking about Federal revenues that 
then get disbursed to other states. And let me just note for 
the record that two of those states that actually receive more 
money from the Federal Government than they get back in return 
are Georgia, which receives almost $4 billion more in revenue 
than they send to Washington, D.C., and Alabama, which is 47th 
on the list in terms of a negative disparity, positive for the 
great State of Alabama, which receives----
    Mr. Bachus. You are beginning to run over your time. 
[Laughter.]
    Mr. Jeffries [continuing]. Which receives $17 billion 
more--and I appreciate the Chair's indulgence--$17 billion more 
than they get back in return. So all I am saying is that if we 
want to confront unfairness, let's deal with unfairness broadly 
defined.
    We are happy in New York State to support states like 
Georgia and Alabama, and these are two very good men, two very 
good representatives. But to make the situation worse for a 
donor state like New York in my view is fundamentally unfair, 
and I yield back.
    Mr. Bachus. Thank you, Mr. Jeffries.
    We are going to have a second round now, and we will 
alternate.
    Let me ask the accountants on the panel. I also heard the 
same testimony that Mr. Jeffries did about the $100 million, 
and I was sitting there thinking about what Ms. Brown's company 
had to go through and all these extra income tax returns.
    I am wondering what is the cost of filing all these 
additional income taxes. I mean, I would think that probably--
and I would have thought it was a whole lot more than $100 
million. But I would think that just the accountants, which the 
customers pay--the accountants may do the taxes, but the 
customers pay.
    For instance, one thing they are doing that Ms. Brown said, 
they are paying taxes in two different places. But then they 
are having to file an income tax return--I wouldn't be 
surprised if it was $200 million worth for New York or any 
state. We talked about New York. Mr. Jeffries talked about 
people traveling to New York all the time. Believe you me, they 
travel to Dallas, they travel to Las Vegas, they travel to all 
these places that don't collect this income tax. So, I mean, 
they travel.
    But I am wondering, Mr. Porter, any one of you, how much do 
you estimate just the cost of compliance is with, say, New 
York? I mean, that is where most of the resistance is coming 
from.
    Mr. Porter. I have no idea how much it would be on a state-
by-state basis. I can just speak to what I see typically in my 
practice and when I am preparing tax returns. Again, the type 
of returns--I am from West Virginia, a predominantly rural 
community. The individuals that I am preparing taxes for are 
average Americans that are making $100,000, $50,000, whatever 
the number may be. And I can tell you that when I start doing 
multiple tax returns for multiple states, each additional state 
is probably going to increase their fees by 30, 40 percent per 
state from what they are going to pay.
    So there is a fair amount of cost involved to the 
individuals. There is also a fair amount of cost involved to 
the employers that are having to keep up with all of the 
recordkeeping and keep up with all of the tax systems across 
the country that they have employees working in.
    Ms. Riehl. Mr. Chairman, one of the reasons this bill, the 
legislation first passed in the Congress, we have doubled the 
number of coalition supporters. We are now at 263 
organizations, and that is because of the exorbitant cost to 
those companies, and those are fairly large. But we did hear 
testimony about how this disproportionately affects small 
businesses as well, who do this on their own or they have to 
pay for an expert outside. But the disproportionate cost, the 
exorbitant cost, and certainly the compliance burden.
    So when you put those together, it depends on how 
sophisticated your systems are now and what you have to do to 
be in compliance later. We are really trying to avoid much of 
that.
    I will say on the $100 million in New York, we have a 
difference of opinion. We have actually calculated that 
differently in the Ernest & Young study that is part of the 
record, and I would say this. If, in fact, New York claims that 
it is as high as $100 to $120 million, that doubles the impact 
to the states it is pulling it away from. So the biggest impact 
state right now is the State of New Jersey. We think it is 
about $26 million. If it is, in fact, as New York says, closer 
to double that number, it is more like $50 million.
    So it is not money that is coming from New York from 
invisible places. It is actually coming from the coffers of 
other states.
    Mr. Bachus. Right. And, I mean, Mr. Jeffries mentioned 
Federalism, and that is our system in this country. But he was 
talking about the Constitution, and Section 8 of the 
Constitution specifically gives the Congress the power to 
regulate commerce among the several states, interstate 
commerce, and we are not supposed to burden or restrain it. 
And, boy, this comes pretty close to a burden on interstate 
commerce.
    Let me close. I have 34 seconds.
    I just found out that--and I am not picking on New York. 
You used that as an example, Mr. Carter. But they have been 
most resistant to this legislation. If I take my car in--I 
didn't realize this, but if I park in Manhattan, I pay 18.3 
percent tax on parking my car. I will tell you, $30 or $40, and 
then I am paying $6.00 or $8.00 tax every day. That is a pretty 
good deal for New York, on top of everything else. I guess I 
will just pay that airport tax next time. But I can't get 
around the lodging tax.
    Mr. Johnson?
    Mr. Johnson. Thank you, Mr. Chairman.
    Does anyone know how much money or how much revenue, let's 
say, New York--by the way, I am not beating up on New York. I 
love New York.
    I love New York. That sounds so good.
    Mr. Bachus. You have to, because of all the taxes you pay 
when you go there.
    Mr. Johnson. But does anyone know how much New York 
collects in non-resident income taxes per year?
    Ms. Riehl. If this law was to change from their 1-day rule 
for an employee and a 14-day rule for withholding for the 
employer, at this point if it changed to the 30-day standard 
found in 1129, we think it would impact the state to the tune 
of about $45 million. I don't know what they get in actual 
revenue under the current system.
    Mr. Johnson. Do you have any idea, Mr. Carter?
    Mr. Carter. I do not, Ranking Member.
    Mr. Johnson. I wonder if they have any idea.
    Well, let's look at it from the other side. How many 
employees, non-resident employees, actually fill out a New York 
State income tax return? Do we know that?
    Mr. Carter. I do not. I do know in Delaware that we receive 
total tax returns that come in, approximately 20 percent of the 
returns are from non-residents and 80 percent are from 
residents. I would speculate that New York State, especially 
when you get down around the southern part of the state, has a 
very high percentage. But the state as a whole, I don't know if 
it is the same 80/20 percent or----
    Mr. Johnson. So, in other words, you are saying Delaware, 
of the 100 percent of tax returns you receive, 20 percent of 
those are from----
    Mr. Carter. Non-residents.
    Mr. Johnson [continuing]. Non-residents.
    Mr. Carter. Yes. We receive approximately half-a-million 
returns a year, of which 400,000 are resident returns and 
100,000 non-resident returns.
    Mr. Johnson. Now, all of those non-resident income tax 
returns were generated as a result of employers having to 
withhold. Is that correct?
    Mr. Carter. For the most part, yes.
    Mr. Johnson. We do have employers who are charged with the 
duty of abiding by state law, each and every state law, 50, and 
so this is a cost that businesses bear who actually keep up 
with all of that.
    Mr. Carter. Correct.
    Mr. Johnson. And if they fail to keep up with it, then they 
are liable under Federal law.
    Mr. Carter. Not Federal law. Well, they are liable for the 
state tax liability.
    Mr. Johnson. Yes.
    Mr. Carter. Under state tax law.
    Mr. Johnson. Under Federal law, Sarbanes-Oxley, the chief 
executive would have to sign documentation----
    Mr. Carter. Under Sarbanes-Oxley.
    Mr. Johnson [continuing]. Swearing that they are in 
compliance with each and every state law within which they are 
operating.
    Mr. Carter. Correct from that aspect.
    Mr. Johnson. Any idea how much that actually costs the 
businesses, both large and small? Anyone?
    Ms. Riehl. Mr. Johnson, again, I think that we have asked 
for that kind of data from our coalition members, and they 
don't know how to assess it themselves. But you are correct in 
that Sarbanes-Oxley and some of the other changes that have 
happened recently at the Federal level to financial reporting 
documents put personal liability on corporate officers and 
their tax preparers; that they, in fact, are attesting legally 
to be in compliance with all Federal, state, and local laws. 
And that is precisely why there is a growing number of 
supporters of this legislation, because they are at risk of 
being out of compliance. They sign these forms--they have to--
and there is not necessarily knowledge that they are in full 
compliance, and that is what we are trying to rectify.
    Mr. Johnson. In each of these states, the legislators meet 
maybe once a year or one session per year. These sessions take 
place at different times during the year, and sometimes there 
can even be special sessions. And in any particular session in 
any particular state, there could be a change in the income tax 
laws. So these businesses, both large and small, are charged 
with the responsibility of keeping up, monitoring these 50 
state legislatures. Is that correct?
    Ms. Riehl. Yes.
    Ms. Brown. Absolutely, and sometimes some of those laws are 
retroactive. So not only does the employer have to know about 
it and comply with it, but sometimes it is even retroactive.
    Mr. Johnson. I really hate that one or two states may 
suffer a decline in income tax revenue because of this 
legislation, should it pass. However, looking at the greater 
good, I think that is something that we have to consider. It is 
really not meant to hurt any particular state.
    But I am comforted in knowing that New York does have quite 
vigorous taxing rates for various activities, so I don't 
believe they are going to go broke. Plus, they just did some 
tax--I think, watching TV, I see where if you locate your 
business in New York in a certain location, certain locations 
throughout the State of New York, you may not have to pay any 
taxes as a corporation.
    Ms. Riehl. That is for new businesses and definitely part 
of a very comprehensive tax reform effort that the state just 
finished within the last 30 days. One of the items that was 
suggested that they look at in their budget reform was actually 
changing these rules, but they neglected to do so.
    Mr. Johnson. Changing the income tax rules.
    Ms. Riehl. The non-resident withholding rules, yes.
    Mr. Johnson. Yes, because one day----
    Ms. Riehl. Is too lucrative.
    Mr. Johnson. Yes. And so companies don't want to locate 
there because of that factor.
    Ms. Riehl. And that is why the change was made to invite 
new businesses in. I should say that we have had ongoing, good 
dialogues with representatives of the Governor's Office and 
others in Albany over the last several years on this, and it is 
a sensitive issue for them in that they have just done a very 
good job when it comes to enforcing the law as it is on the 
books.
    However, after a transition period, after H.R. 1129 is 
actually passed and there is a new starting date of 30 days, 
New York can certainly start at Day 31 doing exactly what it 
does right now. The only advantage that really a state like New 
York with aggressive auditing has is that other states aren't 
being just as aggressive against them, plus the fact that there 
are disparate rates. So when you visit New York, the best you 
can hope for when you are credited against your Georgia 
resident income tax obligation is the Georgia rate. New York's 
rate is mostly high compared to other states, and so there is 
still going to be a fraction that will never be recouped even 
under a credit system.
    So I think in measuring, New York still can be a little bit 
ahead of the curve just simply because their rates are higher 
and they have been more productive with that. We just want a 
new starting date.
    Mr. Johnson. Thank you. And, with that, I would yield back.
    But I would confess my embarrassment at my own great State 
of Georgia, being the Republican citadel that it is, is 
actually mooching on the Federal Government. I just never knew 
that, and I am horrified. I am horrified. I am embarrassed.
    Thank you.
    Mr. Bachus. Obviously, the Alabama and Georgia delegations 
have been doing a fine job for their citizens. [Laughter.]
    I do want to correct the record. I said in Manhattan you 
pay--the city charges 10.3 percent, and then there is a 
Manhattan tax of 8-something. But that only applies--I mean 
does not apply to Manhattan residents. They are exempted from 
that 8.3 percent tax. So only if you are visiting do you get 
hit by that. But I bet even if you are not visiting, you get 
the same protection. They exempt their own residents from that 
tax.
    This concludes today's hearing. Our thanks to all of our 
witnesses for attending.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    I really appreciate your all's testimony, all four of you. 
I think you were ecellent witnesses.
    This hearing is adjourned.
    Mr. Carter. Thank you, Mr. Chairman, Ranking Member.

    [Whereupon, at 3:12 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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