[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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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:
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \12\H.R. 1864 Sec. 2(a).
    \13\Id. Sec. 2(b).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.

                                 
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