H.R. 2315, Mobile Workforce State Income Tax Simplification Act of 2015

H.R. 2315

Mobile Workforce State Income Tax Simplification Act of 2015

Committee
Judiciary

Date
September 21, 2016 (114th Congress, 2nd Session)

Staff Contact
John Huston

Floor Situation

On­­­­ Wednesday, September 21, 2016, the House will consider H.R. 2315, the Mobile Workforce State Income Tax Simplification Act of 2015, under suspension of the rules. H.R. 2315 was introduced on May 14, 2015, by Rep. Mike Bishop (R-MI) and was referred to the Committee on the Judiciary, which ordered the bill reported by a vote of 23 to 4 on June 17, 2015.

Bill Summary

H.R. 2315 would establish consistent criteria for states to determine state taxation and employer withholding for nonresidents who work in a state. The bill specifically prohibits states from taxing the income of employees who work in the state 30 days or less in a calendar year. The prohibition would not apply to the income of professional athletes, entertainers, or public figures. The bill will be effective for the calendar year beginning two years after enactment.

Background

States have varied standards for requiring employers to file personal income tax returns for employees who work for a certain period in a state where they do not live. Employees who travel outside of their states of residence for business purposes are subject to onerous administrative burdens because they may also be legally required to file an income tax return in every other state into which they traveled, even if they were there for only one day.

More than half of the states that have a personal income tax require employers to withhold tax from a nonresident employee’s wages beginning with the first day the nonresident employee travels to the state for business purposes. Other personal income tax states provide for a threshold before requiring tax withholding for nonresident employees.

According to CBO, 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 probably lose the largest amount of revenue—between $50 million and $125 million per year, according to state and industry estimates—and Illinois, Massachusetts, and California would face smaller losses. In contrast, New Jersey would probably gain revenue.

According to the bill sponsor, “Our state income tax structure is burdensome for everyone involved. Dozens of reporting requirements have been imposed on our business community, many of which depend on an employee’s length of travel and income. Our aim is to create one common-sense system by eliminating the complicated paperwork and red tape for employees and reducing costs for our businesses.”[1]

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[1] See Rep. Mike Bishop Press Release, “Bishop Introduces Mobile Workforce State Income Tax Simplification Act of 2015,” May 14, 2015.

Cost

The Congressional Budget Office (CBO) estimates that federal taxation and employer withholding would not be affected by the legislation and that implementing the bill would have no effect on the federal budget. Enacting H.R. 2315 would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply.

CBO estimates that, for all states collectively, the bill would reduce revenues on a net basis by between $50 million and $100 million per year beginning in 2018, the first full year that the bill’s changes would be in effect. Given that range—stemming from the underlying 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 determine whether the net cost of the intergovernmental mandate in the bill would exceed the annual threshold established in the Unfunded Mandates Reform Act (UMRA) ($77 million in 2015, adjusted annually for inflation).

Additional Information

For questions or further information please contact John Huston with the House Republican Policy Committee by email or at 6-5539.