Simplifying Income Tax Requirements for Employees Who Work Multiple Days Per Year Out of State (H.R. 1393)

What is H.R. 1393?

(Updated March 22, 2018)

This bill would eliminate the need for an employee who travels for an extended period of time because of work to file an income tax return in the state they travel to unless they spend more than 30 days working in that state. Workers would only owe income tax in the state they reside in, and a state in which they work for more than 30 days during the calendar year.

Employers would be exempt from state income tax withholding and information reporting requirements for employees not subject to income tax in that state. When determining penalties related to state income tax withholding requirements, employers would be allowed to rely on an employee’s annual determination about how much time they’ll spend working in a state in the absence of fraud or collusion on the employee’s part.

This legislation would exclude the following professions from the definition of “employee”:

• Professional athletes;

• Professional entertainers;

• Production employees who perform services in connection with certain film, television, or other commercial video productions;

• Public figures who are persons of prominence who perform services for wages or other remuneration on a per-event basis.

This legislation would take effect on January 1 of the second calendar year that begins after the enactment of this bill, and wouldn’t apply to any tax obligation accrued before the effective date.

Argument in favor

Workers who travel out of state and their employers shouldn’t have to deal with burdensome reporting and withholding requirements unless the worker spends more than 30 days working in a state they don’t reside in.

Argument opposed

Workers who travel out of state and their employers should be subject to the withholding and reporting requirements of the state they don’t reside in. The 30 day threshold is too and this would diminish state tax revenues.

Impact

Employees who travel out of state multiple days per year for work; employers whose employees travel; state and federal tax agencies.

Cost of H.R. 1393

The CBO estimates that enacting this bill would have no effect on the federal budget.

Additional Info

In-Depth: Sponsoring Rep. Mike Bishop (R-MI) introduced this bill to simplify state income tax requirements for employees who work multiple days per year outside their state of residence:

“Our state income tax structure is too complicated and costly for today’s workforce. Right now, workers who must travel out of state and their respective employers face dozens of erroneous reporting requirements, many of which depend on varying length of travel and income levels. The goal of our bipartisan legislation is to create one simplified system for Americans to do their state income taxes, eliminating the burdensome paperwork and reducing compliance costs for everyone involved. Our Mobile Workforce bill passed unanimously in the House last Congress, and I am optimistic we can get even more done in today’s tax reform climate.”

Lead cosponsor Rep. Hank Johnson (D-GA) concurred, saying:

“This important bipartisan effort streamlines the tax code, while reflecting the needs of a various industries throughout the country. Simplifying our tax system in this manner will help Americans who work across multiple jurisdictions from paying local or state taxes in places other than where they live or work for an extended period of time.”

The House Judiciary Committee passed this bill on a vote of 19-2, with Democrats the lone dissenters on the grounds that the “30-day threshold is simply too long” which “would lead to significant state revenue losses.” The legislation has the bipartisan support of 57 cosponsors, including 37 Republicans and 20 Democrats.

Media:

• Sponsoring Rep. Mike Bishop (R-MI) Press Release
  
• CBO Cost Estimate