[House Report 112-386]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-386
======================================================================
MOBILE WORKFORCE STATE INCOME TAX SIMPLIFICATION ACT OF 2011
_______
February 3, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of Texas, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1864]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1864) to limit the authority of States to tax
certain income of employees for employment duties performed in
other States, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 3
Background and Need for the Legislation.......................... 3
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 6
New Budget Authority and Tax Expenditures........................ 7
Congressional Budget Office Cost Estimate........................ 7
Performance Goals and Objectives................................. 8
Advisory on Earmarks............................................. 8
Section-by-Section Analysis...................................... 8
Dissenting Views................................................. 11
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Mobile Workforce State Income Tax
Simplification Act of 2011''.
SEC. 2. LIMITATIONS ON STATE WITHHOLDING AND TAXATION OF EMPLOYEE
INCOME.
(a) In General.--No part of the wages or other remuneration earned by
an employee who performs employment duties in more than one State shall
be subject to income tax in any State other than--
(1) the State of the employee's residence; and
(2) the State within which the employee is present and
performing employment duties for more than 30 days during the
calendar year in which the wages or other remuneration is
earned.
(b) Wages or Other Remuneration.--Wages or other remuneration earned
in any calendar year shall not be subject to State income tax
withholding and reporting requirements unless the employee is subject
to income tax in such State under subsection (a). Income tax
withholding and reporting requirements under subsection (a)(2) shall
apply to wages or other remuneration earned as of the commencement date
of employment duties in the State during the calendar year.
(c) Operating Rules.--For purposes of determining an employer's State
income tax withholding and reporting requirements--
(1) an employer may rely on an employee's determination of
the time expected to be spent by such employee in the States in
which the employee will perform duties absent--
(A) the employer's actual knowledge of fraud by the
employee in making the determination; or
(B) collusion between the employer and the employee
to evade tax;
(2) except as provided in paragraph (3), if records are
maintained by an employer in the regular course of business
that record the location of an employee, such records shall not
preclude an employer's ability to rely on an employee's
determination under paragraph (1); and
(3) notwithstanding paragraph (2), if an employer, at its
sole discretion, maintains a time and attendance system that
tracks where the employee performs duties on a daily basis,
data from the time and attendance system shall be used instead
of the employee's determination under paragraph (1).
(d) Definitions and Special Rules.--For purposes of this Act:
(1) Day.--
(A) Except as provided in subparagraph (B), an
employee is considered present and performing
employment duties within a State for a day if the
employee performs more of the employee's employment
duties within such State than in any other State during
a day.
(B) If an employee performs employment duties in a
resident State and in only one nonresident State during
one day, such employee shall be considered to have
performed more of the employee's employment duties in
the nonresident State than in the resident State for
such day.
(C) For purposes of this paragraph, the portion of
the day during which the employee is in transit shall
not be considered in determining the location of an
employee's performance of employment duties.
(2) Employee.--The term ``employee'' has the same meaning
given to it by the State in which the employment duties are
performed, except that the term ``employee'' shall not include
a professional athlete, professional entertainer, or certain
public figures.
(3) Professional athlete.--The term ``professional athlete''
means a person who performs services in a professional athletic
event, provided that the wages or other remuneration are paid
to such person for performing services in his or her capacity
as a professional athlete.
(4) Professional entertainer.--The term ``professional
entertainer'' means a person who performs services in the
professional performing arts for wages or other remuneration on
a per-event basis, provided that the wages or other
remuneration are paid to such person for performing services in
his or her capacity as a professional entertainer.
(5) Certain public figures.--The term ``certain public
figures'' means persons of prominence who perform services for
wages or other remuneration on a per-event basis, provided that
the wages or other remuneration are paid to such person for
services provided at a discrete event, in the nature of a
speech, public appearance, or similar event.
(6) Employer.--The term ``employer'' has the meaning given
such term in section 3401(d) of the Internal Revenue Code of
1986 (26 U.S.C. 3401(d)), unless such term is defined by the
State in which the employee's employment duties are performed,
in which case the State's definition shall prevail.
(7) State.--The term ``State'' means any of the several
States.
(8) Time and attendance system.--The term ``time and
attendance system'' means a system in which--
(A) the employee is required on a contemporaneous
basis to record his work location for every day worked
outside of the State in which the employee's employment
duties are primarily preformed; and
(B) the employer uses this data to allocate the
employee's wages for income tax purposes among all
States in which the employee performs employment duties
for such employer.
(9) Wages or other remuneration.--The term ``wages or other
remuneration'' may be limited by the State in which the
employment duties are performed.
SEC. 3. EFFECTIVE DATE; APPLICABILITY.
(a) Effective Date.--This Act shall take effect on January 1 of the
2d year that begins after the date of the enactment of this Act.
(b) Applicability.--This Act shall not apply to any tax obligation
that accrues before the effective date of this Act.
Purpose and Summary
The Mobile Workforce State Income Tax Simplification Act of
2011 establishes uniform rules for the application of states'
income tax laws to employees who perform employment duties in a
state but do not reside there. Under the bill, an employee is
not responsible to pay income tax to, nor an employer required
to withhold and remit income tax on behalf of, a state in which
the employee has earned wages for 30 days or fewer during a
calendar year.\1\
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\1\Mobile Workforce State Income Tax Simplification Act of 2011,
H.R. 1864, Sec. 2, 112th Cong. (2011).
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Background and Need for the Legislation
The Constitution grants Congress the exclusive power to
enact legislation concerning matters that have a ``substantial
effect'' on interstate commerce.\2\ The Supreme Court has
inferred from this grant of power that state and local laws are
unconstitutional if they place an undue burden on interstate
commerce--a principle commonly known as the ``dormant''
commerce clause.\3\ ``The framers were most concerned about
stopping protectionist state legislation where a state would
discriminate against out-of-staters to benefit its citizens at
the expense of out-of-staters.''\4\
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\2\U.S. Const. art. I, Sec. 8, cl. 3; U.S. v. Lopez, 514 U.S. 549,
559 (1995).
\3\See Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) (invalidating
state's grant of monopoly to steamship operator that prevented holders
of Federal steamship licenses from navigating state waterways); Erwin
Chemerinsky, Constitutional Law: Principles and Policies Sec. 5.3 (2d
ed. 2002).
\4\Chemerinsky, supra note 3, at Sec. 5.3.4.
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As sovereign governments, states are generally free to set
their own income tax policy, but they must do so in a way that
does not place a substantial burden on interstate commerce. As
the American workforce is increasingly mobile, Congress has a
constitutional duty to ensure that the disparity among states'
income tax policies does not stifle interstate economic
activity. Forty-one states currently impose a personal income
tax on income earned within their borders regardless of whether
the earner is a resident of the state.\5\ In each of those
states, not only must a nonresident employee pay tax after
performing work for a certain amount of time or earning wages
in the state, but the employee's employer must withhold that
state's income tax on behalf of the employee and remit it to
the state at the end of the year. The question, then, is
whether compliance with 41 different states' income tax and
withholding laws places a substantial burden on employees who
cross state lines to do their job.
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\5\For a compilation of current state income tax rates, see Tax
Foundation, State Individual Income Tax Rates, 2000-2011, available at
http://www.taxfoundation.org/taxdata/show/228.html. Note that New
Hampshire and Tennessee tax only unearned income, e.g. income from
dividends and interest, bringing the number of states that tax earned
income to 41.
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Income tax and employer withholding laws vary significantly
among jurisdictions. Some states require an employer to
withhold income tax on the first day of the employee's travel;
others use a hybrid time-spent and dollars-earned test to
trigger withholding. For example, in New York, a non-resident's
income tax liability is triggered the moment he or she earns
wages in the state, but the employer's withholding requirement
is not triggered until the 14th day of wage-earning. A non-
resident's income tax liability to Idaho is triggered after he
makes $1,000 in wages in the state.
Employees are ultimately responsible to report their own
income tax liability to a state. Thus in each nonresident
income tax state where an employee earns wages, he is required
to fill out and file a tax return. In the current system, each
state sets its own de minimis threshold. Employees who conduct
only transient business or earn below a certain amount of wages
in the nonresident state need not file a return or pay taxes.
The variation among state laws, however, means that an
individual who is required to travel for work must track and
comply with up to 41 different states' income tax laws,
including the preparation of numerous tax returns to
nonresident states in many of which he may ultimately be
entitled to a refund. This result may discourage employees who
conclude that the burden of learning a nonresident state's
income tax laws and filing a return there outweighs the
opportunity to travel to the state for a few days to conduct
business.
Furthermore, the complex patchwork of state income tax
withholding laws creates an unnecessary administrative burden
on small business employers--America's job creators--who must
comply with nonresident states' withholding laws on account of
wages their employees earn in the state.\6\ At a hearing this
Congress, an accountant from West Virginia described the effect
tracking 41 states' income tax rules has on small businesses:
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\6\Mobile Workforce State Income Tax Simplification Act of 2007:
Hearing on H.R. 3359 Before Subcomm. on Commercial & Admin. Law of the
H. Comm. on the Judiciary, 110th Cong. (2007), at 16 (statement of
Douglas L. Lindholm, President and Executive Director, Council on State
Taxation) [hereinafter 2007 Hearing].
Businesses, including small businesses and family
businesses, that operate interstate are subject to
significant regulatory burden with regard to compliance
with nonresident State income tax withholding laws.
These administrative burdens take existing resources
from operational aspects of the business and may
require the hiring of additional administrative staff
or outside experts in order to meet the demands of
compliance.\7\
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\7\Mobile Workforce State Income Tax Simplification Act of 2011:
Hearing on H.R. 1864 Before Subcomm. on Courts, Commercial & Admin. Law
of the H. Comm on the Judiciary, 112th Cong. (2011), at 13 (testimony
of Jeffrey A. Porter, Owner, Porter & Associates, CPAs, on behalf of
the American Institute of Certified Public Accountants).
Similarly, in the 110th Congress, a representative of the
American Payroll Association explained these administrative
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burdens:
Even in the case of an employee who resides in one
State and works throughout the year in another State,
State and local tax withholding and reporting can be
very complicated. The employer has to verify the
employee's State of residence, check whether the two
States have a reciprocity agreement, analyze the tax
laws of both States, and likely withhold tax for both
States and prepare a form W-2 for both States.\8\
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\8\2007 Hearing, supra note 6, at 29 (statement of Dee Nelson,
Payroll Manager, Alutiiq, LLC and Subsidiaries, on behalf of American
Payroll Association).
The resources a small business must devote to income tax
withholding compliance is generally offset by raising prices on
the cost of goods and services the business sells to consumers.
Large businesses that employ thousands of people are also
burdened by the cumulative effect of non-uniform state income
tax laws. The Sarbanes-Oxley Act of 2002 requires management to
sign off on the internal controls that ensure state tax
compliance and requires auditors to certify management's
assessment.\9\ The diversity of state income tax laws means
that large public companies and their auditors must invest a
significant amount of time ensuring that the company has
withheld correctly for each employee at great expense to the
firm.\10\
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\9\Sarbanes-Oxley Act of 2002, Pub. L. 107-204, Sec. 404, 116 Stat.
745, 789 (codified at 15 U.S.C. Sec. 7262) (2002).
\10\2007 Hearing, supra note 6, at 10 (statement of Rep. Henry
``Hank'' Johnson).
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The Mobile Workforce State Income Tax Simplification Act
would substantially simplify state income tax law by imposing a
uniform de minimis standard for nonresident taxation and
employer withholding. It satisfies the advice of reputed tax
professor Walter Hellerstein, who in 2007 urged Congress:
I really do wish to make it clear that I believe the
States have a legitimate interest in assuring that
workers who earn income in the State pay their fair
share of the State tax burdens for the benefits and
protections that the State provides to them. But this
legitimate interest has to be balanced against the
burdens that are imposed on multi-state enterprises and
on the conduct of interstate commerce by uncertain,
inconsistent, and unreasonable withholding obligations
imposed by the State.\11\
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\11\2007 Hearing, supra note 6, at 71 (statement of Walter
Hellerstein, Francis Shackelford Distinguished Professor of Taxation
Law, University of Georgia School of Law).
The bill provides that an employee shall not be subject to
income tax in a nonresident state unless he or she has worked
for at least 30 days in that jurisdiction.\12\ It further
provides that an employer is not responsible for withholding on
behalf of any employee who is not subject to tax under the
Act.\13\
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\12\H.R. 1864 Sec. 2(a).
\13\Id. Sec. 2(b).
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The Mobile Workforce State Income Tax Simplification Act is
designed to simplify tax liability and withholding rules, not
enable taxpayers to escape their duty to pay state governments
their fair share. Consider an example. In 2010, Albert was a
resident of Virginia and earned $50,000 total. Of that $50,000,
$10,000 was earned when Albert traveled to New York for work
and spent 13 days there. Under current law, Albert owes income
tax to New York but his employer did not withhold because New
York's 14-day withholding trigger was not met. Assume Albert
pays $800 to New York in taxes. When Albert files his Virginia
tax return, he will report that he receive a tax credit in the
amount of $800 against his Virginia returns. If the bill were
enacted, however, Albert would owe no tax to New York because
he did not earn wages there for more than 30 days. So although
Albert would not pay $800 to New York, neither would he receive
an $800 credit on his Virginia taxes for taxes paid to other
governments. In this way, the bill does not theoretically
reduce any one state's tax revenues--after all, for every
Albert in Virginia who works temporarily in New York, there is
an Albert in New York who works temporarily in Virginia--but
simply provides clear rules for nonresident income taxation and
reduces unnecessary paperwork for taxpayers and small
businesses.
Hearings
The Committee on the Judiciary's Subcommittee on Courts,
Commercial and Administrative Law held a legislative hearing on
H.R. 1864 on May 24, 2011. Testimony was received from: Jeffrey
A. Porter (Owner, Porter & Associates, CPAs); Patrick T. Carter
(Director, Delaware Division of Revenue) on behalf of the
Federation of Tax Administrators; and Joseph R. Crosby (Chief
Operating Officer and Senior Director of Policy, Council on
State Taxation).
Committee Consideration
On November 17, 2011, the Judiciary Committee met in open
session and ordered the bill H.R. 1864 reported favorably to
the House, with an amendment, by voice vote, a quorum being
present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
H.R. 1864.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 1864, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, January 25, 2012.
Hon. Lamar Smith, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1864, the ``Mobile
Workforce State Income Tax Simplification Act of 2011.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz, who can be reached at 226-2860.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 1864--Mobile Workforce State Income Tax Simplification Act of
2011.
As ordered reported by the House Committee on the Judiciary on
November 17, 2011
H.R. 1864 would limit the authority of States to tax the
income of certain residents. CBO estimates that implementing
the legislation would have no impact on the Federal budget.
Enacting the bill would not affect direct spending or revenues,
so pay-as-you-go procedures do not apply.
H.R. 1864 would impose an intergovernmental mandate as
defined in the Unfunded Mandates Reform Act (UMRA) by
prohibiting States from taxing the income of employees who work
in the State for fewer than 31 days. The prohibition would not
apply to the income of professional athletes, entertainers, or
public figures. UMRA includes in its definition of mandate
costs any amounts that State governments would be prohibited
from raising in revenues as a result of the mandate. The
mandate costs of H.R. 1864 would include any taxes that State
governments would be precluded from collecting under the bill.
Most States that levy a personal income tax allow residents
to take a credit for income taxes that the residents pay to
another State. The cost of the mandate would equal, for all
States collectively, the difference between the amount of
revenue that States receive from nonresidents who work in the
State for fewer than 31 days and the amount they would receive
from residents whose credits would be lower under the bill.
Generally, States that have large employment centers close to a
State border would lose the most revenue; States from which
employees tend to commute would gain revenue. For example, New
York would likely lose the largest amount of revenue-from $50
million to $100 million according to State and industry
estimates-and Illinois, Massachusetts, and California would
face smaller losses. New Jersey and Connecticut would likely
gain revenue.
Because of uncertainty about the amount of revenue that
States collect from nonresidents, and the amount they would
receive from residents whose credits would be lower under the
bill, CBO cannot estimate the net cost of the mandate.
Consequently, CBO cannot determine whether the net cost of the
intergovernmental mandate in the bill would exceed the annual
threshold established in UMRA ($73 million in 2012, adjusted
annually for inflation).
H.R. 1864 contains no private-sector mandates as defined in
UMRA.
The CBO staff contacts for this estimate are Mark Grabowicz
(for Federal costs) and Elizabeth Cove Delisle (for
intergovernmental impacts). The estimate was approved by
Theresa Gullo, Deputy Assistant Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
1864 will facilitate interstate commerce by increasing
uniformity among states' income tax policies.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 1864 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
Section 1. Short Title.
States that the Act may be referred to as the ``Mobile
Workforce State Income Tax Simplification Act of 2011''.
Section 2. Limitations on State Withholding and Taxation of Employee
Income.
Provides that an employee is not subject to income tax
except in the state in which he or she resides and a
nonresident state in which he or she has performed work for at
least 30 days.
Provides that an employer is not responsible for
withholding on behalf of an employee that is not subject to
income tax under the Act.
Sets certain operating rules for determining where and for
how long an employee performs work in a jurisdiction for
purposes of the Act.
Defines terms used in the Act.
Section 3. Effective Date.
Provides that the Act shall be effective on January 1 of
the second year that begins after the date of the enactment of
the Act.
Dissenting Views
H.R. 1864, the ``Mobile Workforce State Income Tax
Simplification Act of 2011,'' attempts to address a valid
concern, but in so doing would lead to severe state revenue
losses. Supporters of the legislation contend that a uniform
threshold for when an employer must withhold state income tax
will provide simplicity and be more administrable than the
current varied state standards.\1\ While a uniform threshold
would indeed provide more simplicity, the 30-day threshold in
the reported bill is excessive. Without a simple fix to
establish a more reasonable threshold we cannot support the
reported bill. For this reason and others set forth below, we
must respectfully dissent.
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\1\Mobile Workforce State Income Tax Simplification Act of 2011:
Hearing on H.R. 1864 before the Subcomm. on Courts, Commercial and
Admin. Law of the H. Comm. on the Judiciary, 112th Cong. 66 (2011)
(written statement of Robert Melendres, Chief Legal Officer and
Corporate Secretary for International Game Technology); id. at 70
(written statement of Nancy L. Miller, Assistant Treasurer of Unisys
Corporation).
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H.R. 1864, the ``Mobile Workforce State Income Tax
Simplification Act of 2011,'' seeks to address the differing
standards that states use to impose income taxes on a non-
resident. A total of 41 states currently collect state income
taxes\2\ and each has established a threshold for when an
earner must pay such taxes and when the employer must withhold.
The thresholds generally fall into two categories at which
employers must begin to withhold income for state tax purposes:
a days threshold and an income-earned threshold.\3\ For
example, New York requires withholding after an individual has
worked 14 days within the state\4\ while Wisconsin requires
withholding once the employee has earned at least $1,500 within
the state.\5\
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\2\Id. at 2 (statement of Ranking Member Coble); id. at 60 (written
statement of William Dunn, Senior Manager of Government Relations for
the American Payroll Association).
\3\Id. at 17 (written statement of Jeffrey A. Porter, speaking on
behalf of the American Institute of Certified Public Accountants).
\4\State of New York--Department of Taxation and Finance, Income/
Franchise Tax--District Office Audit Manual, Withholding Tax Field
Audit Guidelines, at 24 (Sept. 17, 2004), available at http://
www.bcnys.org/inside/tax/withholding.pdf.
\5\Wis. Stat. Sec. 71.64(6)(b) (2011).
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In an ever-increasing mobile U.S. workforce, employees may
work in several states throughout the year. As a result, these
employees may incur state income tax obligations in more than
just their resident state. An employee is obligated to pay
state income taxes to the state where income is earned or where
the services giving rise to the income are performed.\6\
Although an employee's resident state may tax all income
regardless of where the income is earned, the resident state
typically provides a credit for any income taxes paid to other
states.\7\
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\6\Shaffer v. Carter, 252 U.S. 37, 52 (1920) (``[J]ust as a State
may impose general income taxes upon its own citizens and residents
whose persons are subject to its control, it may, as a necessary
consequence, levy a duty of like character, and not more onerous in its
effect, upon incomes accruing to non-residents from their property or
business within the State, or their occupations carried on therein.'').
\7\See New York ex rel. Cohn v. Graves, 300 U.S. 308 (1937);
Lawrence v. State Tax Comm'n, 286 U.S. 276 (1932) (holding that the
state has unrestricted power to tax citizens' net income even if
activities are carried on outside of the state). An employee's state of
residence provides a credit for any income taxes paid to other states.
See State Tax Guide (CCH) at 15-110 (chart) (1997) (illustrating that
nearly all states with a broad-based personal income tax have enacted
tax credits for income taxes paid to other states).
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Supporters of H.R. 1864 contend that these differing
thresholds have caused burdensome compliance and paperwork
requirements.\8\ Others assert that the differing thresholds
challenge many employees who must travel for work.\9\ An
employee who has met a threshold in another state but was not
aware of that threshold is still liable for the taxes owed.
Accordingly, H.R. 1864 would prevent a state from imposing
income taxes on non-residents who work 30 days or less within a
calendar year in the state.\10\ The 30-day threshold would not
apply, however, to certain high-income individuals (e.g.,
professional athletes, entertainers, and certain public
figures), although they would still be subject to current state
thresholds.\11\
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\8\Hearing on H.R. 1864 at 16-18.
\9\Id. at 2 (statement of Ranking Member Coble); id. at 35 (written
statement of Joseph R. Crosby, COO and Senior Policy Director for the
Council on State Taxation).
\10\H.R. 1864, Sec. 2(a)(2).
\11\H.R. 1864, Sec. 2(d)(2) (high-income individuals are excluded
from the definition of ``employee'' and therefore the 30-day threshold
would not apply to them).
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The solution that H.R. 1864 proffers unfortunately goes too
far and will consequently lead to severe state revenue losses.
Specifically, the 30-day threshold would allow a non-resident
employee to work six complete business weeks (or more than ten
percent of the year) in another state and avoid an obligation
to pay income taxes to that state.\12\ The loss of state income
tax revenue will further exacerbate budget shortfalls in many
states. Indeed, 29 states have already projected or addressed
budget shortfalls totaling $44 billion for fiscal year
2013.\13\ States could be forced to address their increased
shortfalls by shifting the tax burden onto local taxpayers
through increased property, income, and sales taxes, or by
cutting governmental services.
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\12\Mobile Workforce State Income Tax Simplification Act of 2011:
Markup of H.R. 1864 before the H. Comm. on the Judiciary, 112th Cong.
94 (November 17, 2011) (statement of Representative Jerrold Nadler).
\13\Elizabeth McNichol, et al., Center on Budget and Policy
Priorities, States Continue to Feel Recession's Impact, Jan. 9, 2012,
available at http://www.cbpp.org/files/9-8-08sfp.pdf.
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The Congressional Budget Office (CBO) estimates that the
30-day threshold imposed by H.R. 1864 will lead to revenue
losses for California, Illinois, and Massachusetts, and a
significant revenue loss for New York,\14\ which itself
estimates that its actual revenue loss would be between $95
million and $115 million starting in 2013.\15\ Of note,
``[t]his revenue loss is greater than the revenue impact on all
other states combined.''\16\ For perspective, $115 million
would pay the salaries for more than 1,600 teachers\17\ or more
than 1,900 fire fighters in New York.\18\
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\14\Congressional Budget Office Cost Estimate, H.R. 1864: Mobile
Workforce State Income Tax Simplification Act of 2011 (Jan. 25, 2012).
\15\Letter from Thomas H. Mattox, Commissioner of Department of
Taxation and Finance, State of New York, to Representative Lamar Smith,
Chairman of the House Committee on the Judiciary, and Representative
John Conyers, Ranking Member of the House Committee on the Judiciary
(Feb. 2, 2012) (on file with the House of Representative's Committee on
the Judiciary, Democratic Staff). In his letter, Commissioner Mattox
details how his office calculated that figure:
Our estimate is constructed through a simulation of actual
New York State nonresident tax returns from tax year 2009.
Nonresident wages, the base of the estimate, are grown to
tax year 2013 using the most recent forecast from the New
York State Division of the Budget. We also build in a
behavioral assumption regarding the actions likely to be
taken by some nonresidents to stay below the 30-day
threshold. Finally, the estimate includes an offset for the
reduction in the resident credit New York provides to its
residents who work out-of-state.
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\16\Id.
\17\According to statistics from the National Education
Association, $115 million would support the annual salaries of 1,605
teachers paid at the average annual salary of $71,633 in New York.
National Education Association, Rankings of the States 2010 and
Estimates of School Statistics 2011, at 19, available at http://
www.nea.org/assets/docs/HE/NEA_Rankings_and_
Estimates010711.pdf.
\18\This amount would support the annual salaries of 1,915 fire
fighters paid at the average annual salary of $60,040 in New York.
Bureau of Labor Statistics, Occupational Employment Statistics,
Occupational Employment and Wages, 2010, available at http://
www.bls.gov/oes/current/oes332011.htm.
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Several prominent organizations oppose H.R. 1864 for these
and other reasons. These organizations include the American
Federation of State, County and Municipal Employees, the
American Federation of Teachers, the Department of Professional
Employees, AFL-CIO, the International Association of Fire
Fighters, the International Federation of Professional and
Technical Engineers, the National Education Association, the
Service Employees International Union, the Federation of Tax
Administrators, and the Multistate Tax Commission.\19\
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\19\General Letter from the American Federation of State, County
and Municipal Employees (AFSCME), American Federation of Teachers
(AFT), Department of Professional Employees, AFL-CIO, International
Association of Fire Fighters (IAFF), International Federation of
Professional and Technical Engineers (IFPTE), National Education
Association (NEA), Service Employees International Union (SEIU)
(November 29, 2011); Letter from Patrick T. Carter, President of the
Federation of Tax Administrators, to Member of the Committee on the
Judiciary (November 16, 2011); Letter from Joe Huddleston, Executive
Director of the Multistate Tax Commission, to Representative Howard
Coble, Chairman of the Subcommittee on Courts, Commercial and
Administrative Law of the House Committee on the Judiciary, and
Representative Steve Cohen, Ranking Member of the Subcommittee on
Courts, Commercial and Administrative Law of the House Committee on the
Judiciary (Nov. 15, 2011) (on file with the House of Representatives
Committee on the Judiciary, Democratic Staff).
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We cannot support legislation that will cause states to
incur severe revenue losses, particularly in these difficult
economic times and especially when a simple change to the
legislation would lessen the impact on state revenues. H.R.
1864 could be substantially improved if a more reasonable
threshold was established such as 14 days. Alternatively, the
legislation could be made to conform with the Multistate Tax
Commission's model statute, which would establish a 20-day
threshold.\20\ A lower threshold would ensure uniformity
without severely impacting state revenues.
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\20\Multistate Tax Commission Model Mobile Workforce Statute,
available at http://www.mtc.gov/uploadedFiles/
Multistate_Tax_Commission/Uniformity/Income_Franchise/MWF
%20Ex%20Com%20Memo%202-28-11.pdf.
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While H.R. 1864 is a step toward addressing a valid
concern, we cannot support this legislation unless the bill's
threshold period is modified to lessen its revenue impact on
the states.
John Conyers, Jr.
Jerrold Nadler.