Report text available as:

(PDF provides a complete and accurate display of this text.) Tip?


114th Congress    }                                      {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                      {     114-780

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



 
      MOBILE WORKFORCE STATE INCOME TAX SIMPLIFICATION ACT OF 2015
                                _______
                                

 September 21, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2315]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2315) to limit the authority of States to tax 
certain income of employees for employment duties performed in 
other States, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page

Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     6
Committee Oversight Findings.....................................     8
New Budget Authority and Tax Expenditures........................     8
Congressional Budget Office Cost Estimate........................     8
Duplication of Federal Programs..................................    10
Disclosure of Directed Rule Makings..............................    10
Performance Goals and Objectives.................................    10
Advisory on Earmarks.............................................    10
Section-by-Section Analysis......................................    10
Dissenting Views.................................................    11

                          Purpose and Summary

    The Mobile Workforce Act provides a clear, uniform 
framework for when States may tax nonresident employees who 
travel to the taxing State to perform work. In particular, the 
bill prevents States from imposing income tax compliance 
burdens on nonresidents who work in a foreign state for fewer 
than 30 days in a year.

                Background and Need for the Legislation

    Forty-three States and the District of Columbia levy a 
personal income tax on wages and partnership income.\1\ The 
State tax laws that determine when a nonresident must pay a 
foreign state's income tax, and when employers must withhold 
this tax, are numerous and varied.\2\ Some have a days worked 
in-state threshold. For example, for 2014, a nonresident is 
subject to tax after working 59 days in Arizona, 15 days in New 
Mexico, and 14 days in Connecticut.\3\ Others have a de minimis 
exception to employer withholding requirements based on wages 
earned. That threshold is $1,500 in Wisconsin, $1,000 in Idaho, 
$800 in South Carolina, and $300 a quarter in Oklahoma.\4\ 
Additional States with withholding thresholds include Georgia, 
Hawaii, Maine, New Jersey, New York, North Dakota, Oregon, 
Utah, Virginia, and West Virginia. Some State thresholds are 
tied to personal exemption, standard deduction or filing 
thresholds that can change each year. The remainder of relevant 
States tax income earned within their borders by nonresidents, 
even if the employee only works in the State for 1 day. 
Examples include New York, even though the State obligates 
employers to withhold wages only after 14 days.\5\
---------------------------------------------------------------------------
    \1\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) [hereinafter the 
``2011 Hearing''] (testimony of Jeffrey A. Porter, Owner, Porter & 
Associates, CPAs, on behalf of the American Institute of Certified 
Public Accountants).
    \2\Id.
    \3\Mobile Workforce State Income Tax Simplification Act of 2013: 
Hearing on H.R. 1129 Before Subcomm. on Regulatory Reform, Commercial 
and Antirust Law of the H. Comm. on the Judiciary, 113th Cong. 33 39 
(2014) (statement of Jeffrey A. Porter, Owner, Porter & Associates, 
CPAs, on behalf of the American Institute of Certified Public 
Accountants).
    \4\Id.
    \5\New York State Department of Taxation and Finance, Withholding 
on Wages Paid to Certain Nonresidents Who Work 14 Days or Fewer in New 
York State (July 2012) (available at http://www.tax.ny.gov/pdf/memos/
income/m12_5i.pdf).
---------------------------------------------------------------------------
    Some of these States exempt particular activities, such as 
training or professional development. Yet these exemptions will 
sometimes cover only the withholding requirement. The employee 
may still be required to file.
    These complicated rules impact everyone who travels for 
work and many industries including the retail, manufacturing, 
real estate, technology, food, services, and consulting 
industries. At the Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law's 2014 hearing, a West Virginia 
tax practitioner described the burden on his construction and 
electrical linemen clients who travel frequently for short-term 
projects. He reported filing income tax returns in as many as 
10 different States in a year for these workers.\6\ At the 
Subcommittee's 2015 hearing, a building products company 
executive testified that the patchwork of laws resulted in the 
company issuing fifty W 2's to a single employee for a single 
year. The executive also noted, regarding the compliance 
burden, that ``many of our affected employees make less than 
$50,000 per year and have limited resources to seek 
professional advice.''\7\
---------------------------------------------------------------------------
    \6\Porter, supra note 3.
    \7\Mobile Workforce State Income Tax Simplification Act of 2015: 
Hearing on H.R. 2315 Before Subcomm. on Regulatory Reform, Commercial 
and Antitrust Law of the H. Comm. on the Judiciary, 114th Cong. 1 5 
(2015) (written testimony of Lawrence F. Leaman, Vice President of 
Taxes, Masco Corporation).
---------------------------------------------------------------------------
    States generally allow a credit for income taxes paid to 
another State. However, it is not always dollar-for-dollar when 
local taxes are factored in. Furthermore, such credits provide 
no relief to residents of the nine States that do not impose 
income taxes. Such individuals have been found to bear an 
overall tax burden comparable to residents of States that do 
impose State income taxes, and thus are effectively subject to 
double taxation.\8\
---------------------------------------------------------------------------
    \8\Mobile Workforce State Income Tax Simplification Act of 2013: 
Hearing on H.R. 1129 Before Subcomm. on Regulatory Reform, Commercial 
and Antirust Law of the H. Comm. on the Judiciary, 113th Cong. 42 72 
(2014) (statement of Lori Brown, CPP, Director, Disbursements CACI 
International, Inc.).
---------------------------------------------------------------------------
    There are substantial burdens on employers as well. For 
example, they must determine whether to withhold for a 
nonresident working in a particular State, which can be 
complicated. For example, Georgia has a three-part test looking 
at whether an employee has worked there for 23 days in a 
calendar quarter, whether more than 5 percent of the employee's 
income is attributable to work in Georgia or whether the 
employee has received remuneration for services in Georgia that 
exceeds $5000.\9\
---------------------------------------------------------------------------
    \9\Porter, supra note 3.
---------------------------------------------------------------------------
    Temporary work assignments also require the employer to 
register for a withholding account, which can be ``just as 
burdensome as trying to manage the tax itself.''\10\ Employers 
must track employees' work locations and time spent, which is 
often a manual process.
---------------------------------------------------------------------------
    \10\Brown, supra note 8.
---------------------------------------------------------------------------
    Large businesses may have more resources, but they are also 
more tightly regulated. 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.\11\ The diversity of State income tax 
laws requires public companies and their auditors to invest a 
significant amount of time ensuring that the company has 
withheld correctly for each employee, at great expense to the 
firm.\12\
---------------------------------------------------------------------------
    \11\Sarbanes-Oxley Act of 2002, Pub. L. 107 204, Sec. 404, 116 
Stat. 745, 789 (codified at 15 U.S.C. Sec. 7262) (2002).
    \12\2007 Hearing, supra note 4, at 10 (statement of Rep. Henry 
``Hank'' Johnson).
---------------------------------------------------------------------------
    In short, as a witness told the Subcommittee in 2014, 
``[b]usinesses, including small businesses and family 
businesses, that operate interstate are subject to significant 
regulatory burdens with regard to compliance with nonresident 
State income tax withholding laws.''\13\ These burdens raise 
costs, which are typically passed on to customers.
---------------------------------------------------------------------------
    \13\2011 Hearing at 13 (testimony of Jeffrey A. Porter, Owner, 
Porter & Associates, CPAs, on behalf of the American Institute of 
Certified Public Accountants).
---------------------------------------------------------------------------
    The result is a significant burden on interstate commerce. 
Professor Walter Hellerstein testified in 2007 that States have 
a legitimate interest in assuring that workers earning income 
in a State ``pay their fair share . . . for the benefits and 
protections that the State provides.'' However, that 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.''\14\
---------------------------------------------------------------------------
    \14\2007 Hearing, supra note 4, at 71 (statement of Walter 
Hellerstein, Francis Shackelford Distinguished Professor of Taxation 
Law, University of Georgia School of Law).
---------------------------------------------------------------------------

HOW THE MOBILE WORKFORCE ACT SIMPLIFIES THE STATE INCOME TAX LAW REGIME

    The Mobile Workforce Act would substantially simplify State 
income tax laws by imposing a uniform standard for nonresident 
taxation and employer withholding. The bill provides that an 
employee is not subject to income tax in a nonresident State 
unless the employee has worked for at least 30 days in that 
jurisdiction.\15\ This threshold is not continuous, so an 
employee that makes a number of short business trips to a State 
might still trip it. Once tripped, the withholding obligation 
is retroactive to the first day worked in the State.
---------------------------------------------------------------------------
    \15\Mobile Workforce State Income Tax Simplification Act of 2015, 
H.R. 2315 Sec. 2(a), 114th Congress (2015).
---------------------------------------------------------------------------
    The bill further provides that an employer is not 
responsible for withholding on behalf of any employee who is 
not subject to a State income tax as a result of the bill.\16\ 
For purposes of determining penalties related to a failure to 
report or withhold, employers are entitled to rely on their 
employees' report of days spent in a nonresident State unless 
the employer uses a time and attendance system for its 
employees.\17\
---------------------------------------------------------------------------
    \16\Id. Sec. 2(b).
    \17\Id. Sec. 2(c).
---------------------------------------------------------------------------
    Finally, the bill exempts certain professional athletes, 
entertainers, and public figures who, because of their 
prominence, are paid on a per appearance basis. (i.e., they 
will not receive the 30-day exemption.)\18\ The rationale is 
that individuals like musical performers and professional 
athletes earn income specifically from playing at a venue in 
the foreign state. By contrast, even a highly-paid employee's 
temporary presence in a foreign state is typically incidental 
to that employee's job.
---------------------------------------------------------------------------
    \18\Id. Sec. 2(d)(2).
---------------------------------------------------------------------------

                      COUNTERING ASSERTED CONCERNS

    State revenue departments that oppose the bill raise 
several arguments. First, they invoke the source principle that 
income should be taxed where it is earned. This may be true 
generally, but this bill deals with bringing uniformity to a 
small set of de minimis exceptions, in order to reduce 
compliance costs.
    Indeed, an analysis from Ernst & Young, LLP, offered as 
testimony in the 111th Congress, found that the bill's revenue 
impact is minimal. In particular, it predicted a net revenue 
change nationwide for States of merely one hundredth of 1 
percent (.01%), which translates into a $42 million overall 
reduction in personal income taxes.\19\ A July 9, 2015 update 
to that analysis found nearly identical results.\20\ This seems 
reasonable, since for every nonresident whose income tax a 
State loses, the State gains from not having to provide a 
credit to in-state residents who temporarily work and therefore 
currently pay taxes out of State. The result should 
approximately be a wash. The benefit is in reducing complexity 
and compliance burdens.
---------------------------------------------------------------------------
    \19\Mobile Workforce State Income Tax Simplification Act of 2013: 
Hearing on H.R. 1129 Before Subcomm. on Regulatory Reform, Commercial 
and Antirust Law of the H. Comm. on the Judiciary, 113th Cong. 14 30 
(2014) (statement Maureen B. Riehl Vice President, Government Affairs 
Council On State Taxation (COST)).
    \20\Ernst & Young LLP, Estimates of State-By-State Impacts of The 
Mobile Workforce State Income Tax Fairness And Simplification Act 
Prepared for The State Tax Research Institute (Jul. 9, 2015) (available 
at http://www.cost.org/WorkArea/DownloadAsset.aspx?id=90612).
---------------------------------------------------------------------------
    Opponents cite an industry estimate that New York will lose 
between $50 and $100 million. But the bill does not 
significantly alter the overall amount of income tax collected. 
The size of the pot remains the same. It is merely the 
apportionment that differs, which is appropriate in order to 
reduce compliance burdens and retain sensible limits on State 
regulatory authority over nonresidents.
    It is also true that approximately one-third of the States 
have entered into reciprocity agreements not to tax each 
other's border-state residents' wages. But this still leaves 
two-thirds of the country not covered, and the existing 
agreements are geared toward regular commuters living on State 
borders, rather than workers traveling to multiple locations 
for temporary work.
    At previous Subcommittee hearings, witnesses representing 
State revenue departments, have raised a number of arguments 
centered on potential fraud and gaming of the system.\21\ For 
example, they object to provisions permitting employers to rely 
on employees' estimates of time spent in other jurisdictions. 
They term this ``voluntary reporting'' that has not been 
effective in the income tax enforcement context. However, this 
allowance is made only for purposes of calculating employer 
penalties, not for determining the amount actually owed.\22\
---------------------------------------------------------------------------
    \21\Mobile Workforce State Income Tax Simplification Act of 2013: 
Hearing on H.R. 1129 Before Subcomm. on Regulatory Reform, Commercial 
and Antirust Law of the H. Comm. on the Judiciary, 113th Cong. 75 82 
(2014) (Patrick Carter Director, Division of Revenue for the State of 
Delaware).
    \22\Mobile Workforce State Income Tax Simplification Act of 2015, 
H.R. 2315 Sec. 2(c), 114th Congress (2015).
---------------------------------------------------------------------------
    More importantly, unlike in the general income tax context, 
there is little motive here for fraud or gaming. The amount of 
money at issue (taxes on less than thirty day's wages) is 
minimal. Second, except in nine States, the employee will have 
to pay the tax anyway to that employee's home State, so the 
only savings would be from minor rate differentials between the 
two jurisdictions.

                                Hearings

    The Committee on the Judiciary's Subcommittee on Regulatory 
Reform, Commercial, and Antitrust Law held 1 day of hearings on 
H.R. 2315 and related bills H.R. 1643 and H.R. 2584 on June 2, 
2015. Testimony was received from Mr. Grover Norquist, 
President, Americans for Tax Reform; Mr. Douglas L. Lindholm, 
CEO & Executive Director of the Council on State Taxation; Mr. 
Lawrence F. Leaman, Vice President--Taxes, Masco Corporation; 
Ms. Julie P. Magee, Commissioner, Alabama Department of 
Revenue; and Mr. Dan L. Crippen, Executive Director, National 
Governors Association.

                        Committee Consideration

    On June 17, 2015, the Committee met in open session and 
ordered the bill H.R. 2315 favorably reported, without 
amendment, by a rollcall vote of 23 to 4, 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 the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 2315:
    1. Amendment #1, offered by Mr. Nadler and Mr. Jeffries. 
The Amendment lowers the threshold from 30 days to 14 before a 
State can tax the income of a nonresident temporarily working 
in a foreign state. The amendment was defeated by a rollcall 
vote of 7 to 21.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................
Mr. Chabot (OH)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................              X
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Labrador (ID)..............................              X
Mr. Farenthold (TX)............................
Mr. Collins (GA)...............................
Mr. DeSantis (FL)..............................              X
Ms. Walters (CA)...............................              X
Mr. Buck (CO)..................................              X
Mr. Ratcliffe (TX).............................              X
Mr. Trott (MI).................................              X
Mr. Bishop (MI)................................              X
 
Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................              X
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................              X
Mr. Jeffries (NY)..............................      X
Mr. Cicilline (RI).............................              X
Mr. Peters (CA)................................      X
                                                ------------------------
    Total......................................      7      21
------------------------------------------------------------------------


    2. Motion to Report H.R. 2315. The bill will provide a 
uniform framework, including a 30-day threshold, for when 
States may tax nonresident employees who travel to the taxing 
State to perform work. The motion was agreed to by a rollcall 
vote of 23 to 4.

                             ROLLCALL NO. 2
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................      X
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................
Mr. Issa (CA)..................................      X
Mr. Forbes (VA)................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................
Mr. Gohmert (TX)...............................      X
Mr. Jordan (OH)................................      X
Mr. Poe (TX)...................................      X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................      X
Mr. Farenthold (TX)............................
Mr. Collins (GA)...............................      X
Mr. DeSantis (FL)..............................      X
Ms. Walters (CA)...............................      X
Mr. Buck (CO)..................................
Mr. Ratcliffe (TX).............................      X
Mr. Trott (MI).................................      X
Mr. Bishop (MI)................................      X
 
Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................              X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................              X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................      X
Mr. Jeffries (NY)..............................              X
Mr. Cicilline (RI).............................      X
Mr. Peters (CA)................................      X
                                                ------------------------
    Total......................................     23       4
------------------------------------------------------------------------


                      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. 2315, 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, July 21, 2015.
Hon. Bob Goodlatte, 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. 2315, the ``Mobile 
Workforce State Income Tax Simplification Act of 2015.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Aurora 
Swanson (for Federal costs), who can be reached at 226 2860, 
and Jon Sperl (for intergovernmental mandates), who can be 
reached at 225 3220.
            Sincerely,
                                                Keith Hall,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member



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

      As ordered reported by the House Committee on the Judiciary 
                           on June 17, 2015.




    H.R. 2315 would establish consistent criteria for States to 
determine State taxation and employer withholding for 
nonresidents who work in a State. 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.
    H.R. 2315 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. 2315 would include taxes that State 
governments would be precluded from collecting under the bill.
    Most States that levy a personal income tax allow 
residentsq 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 they would lose--from nonresidents who work in the 
State for fewer than 31 days--and the amount of revenue they 
would gain--from residents whose credits for payments to other 
States 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 
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. Because States tax income at different 
rates and on different tax bases, the changes in tax revenues 
nationwide would not net to zero.
    On the basis of information from officials in a number of 
States, analysis of State tax data, and an analysis by Ernst & 
Young, 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 UMRA ($77 million in 2015, 
adjusted annually for inflation).
    H.R. 2315 contains no private-sector mandates as defined in 
UMRA.
    The CBO staff contacts for this estimate are Aurora Swanson 
(for Federal costs) and Jon Sperl (for intergovernmental 
mandates). This estimate was approved H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 2315 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111 139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 2315 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. 551.

                    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. 
2315 provides clear, uniform guidelines for when States may tax 
nonresident employees who travel to the taxing State to perform 
work.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2315 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
Section 1. Short Title
    This Act may be cited as the ``Mobile Workforce State 
Income Tax Simplification Act of 2015.''
Section 2. Limitations on State Withholding and Taxation of Employee 
        Income
    Subsection (a)--A State may not subject nonresidents to 
personal income tax unless the nonresident is ``present and 
performing employment duties''' for more than 30 days in the 
calendar year in which ``the wages or other remuneration is 
earned.''
    Subsection (b)--No employer withholding requirement for 
nonresidents may be imposed unless the 30-day trigger is met, 
but once triggered, it is retroactive to Day 1 of the 
employees' work in-state.
    Subsection (c)--For purposes of determining penalties 
related to employers' failures to withhold or report, employers 
may rely on an employee's determination of the time spent in a 
nonresident State, unless (1) there is fraud or collusion to 
avoid taxation between the employer and employee; OR (2) the 
employer voluntarily ``maintains a time and attendance system 
that tracks where the employee performs duties on a daily 
basis,'' in which case that data must be used to calculate 
withholding requirements.\23\
---------------------------------------------------------------------------
    \23\This description covers Paragraphs (c)(1) and (c)(3). Paragraph 
(c)(2) merely underscores that the employer may rely on the employee, 
even if it could theoretically gather the necessary information from 
its records, provided that the employer does not maintain a specific 
tracking system described in Paragraph (c)(3).
---------------------------------------------------------------------------
    Subsection (d)--Defines relevant terms. Of particular note:

        (1) LWorking in a State for a ``Day'' means that the 
        employee performs more of the employee's employment 
        duties within such State than in any other State during 
        that day. However, if the employee worked only in the 
        resident and in one nonresident State during that day, 
        it is counted as a nonresident day regardless of the 
        time spent there. Transit time is excluded from these 
        calculations.

        (2) L``Employee'' is defined according to State law 
        consistent with State sovereignty principles. The term 
        does not include a professional athlete, entertainer, 
        or certain public figures.

        (6) L``Employer'' is defined by State law unless the 
        State provides no definition, in which case Federal law 
        controls. Again, this is consistent with State 
        sovereignty principles.

        (8) L``Time and Attendance System'' means a system that 
        requires employees to record the locations where they 
        work every day and that the employer uses that system 
        to allocate employees' wages for tax purposes.

        (9) L``Wages or Other Remuneration'' is left to the 
        States to define.

Section 3. Effective Date; Applicability.
    The Act is effective on January 1 of the second year after 
the date of enactment and does not apply to any tax obligation 
accrued before then.

                            Dissenting Views

    Most would agree that a uniform framework specifying when 
an employer must withhold state income tax would help ensure 
simplicity and be more administrable than the current varied 
state standards.\1\ Although H.R. 2315, the ``Mobile Workforce 
State Income Tax Simplification Act of 2015,'' is intended to 
achieve this result, the means by which it does so would lead 
to significant state revenue losses. Specifically, the bill's 
30-day threshold is simply too long and, as drafted, could 
facilitate manipulation. Our concerns are shared by a broad 
coalition of labor and tax organizations, including the 
American Federation of Labor and Congress of Industrial 
Organizations, the American Federation of State, County and 
Municipal Employees, the American Federation of Government 
Employees, the American Federation of Teachers, the Amalgamated 
Transit Union, the Communications Workers of America, the 
International Federation of Professional and Technical 
Engineers, the International Union of Police Associations, the 
National Education Association, the Service Employees 
International Union, the International Union, United 
Automobile, Aerospace and Agricultural Implement Workers of 
America, the Federation of Tax Administrators, and the 
Multistate Tax Commission.\2\
---------------------------------------------------------------------------
    \1\See e.g., Unofficial Tr. of Markup of H.R. 2315, the Mobile 
Workforce State Income Tax Simplification Act of 2015, H.R. 1643, the 
Digital Goods and Services Tax Fairness Act of 2015, and H.R. 2584, the 
Business Activity Tax Simplification Act of 2015: Before the H. Comm. 
on the Judiciary, 114th Cong. 4-6 (June 17, 2015) (statement of 
Chairman Bob Goodlatte (R-VA)) [hereinafter ``2015 Markup''].
    \2\Letter from the American Federation of Labor and Congress of 
Industrial Organizations, American Federation of State, County and 
Municipal Employees, American Federation of Government Employees, 
American Federation of Teachers, Amalgamated Transit Union, 
Communications Workers of America, International Federation of 
Professional and Technical Engineers, International Union of Police 
Associations, National Education Association, Service Employees 
International Union, International Union, United Automobile, Aerospace 
and Agricultural Implement Workers of America (June 16, 2015) (on file 
with the H. of Representatives Comm. on the Judiciary, Democratic 
Staff); Federation of Tax Administrators Resolution 2015-2 (Federal 
Mobile Workforce Legislation) (June 18, 2015) (on file with the H. of 
Representatives Comm. on the Judiciary, Democratic Staff); Letter from 
Julie P. Magee, Chair of the Multistate Tax Comm'n, to Representative 
Bob Goodlatte, Chairman of the H. Comm. on the Judiciary, & 
Representative John Conyers, Jr., Ranking Member of the H. Comm. on the 
Judiciary (July 8, 2015) (on file with the H. Comm. on the Judiciary 
Democratic staff) [hereinafter ``MTC Letter''].
---------------------------------------------------------------------------
    For these reasons and others set forth below, we must 
respectfully dissent.

                       DESCRIPTION AND BACKGROUND

    In an ever-increasing mobile U.S. workforce, employees 
often 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 and they are obligated to pay 
state income taxes to the state where income is earned or where 
the services giving rise to the income are performed.\3\ 
Although an employee's resident state may tax all income 
regardless of where the income is earned,\4\ the resident state 
typically provides a credit for any income taxes paid to other 
states.\5\
---------------------------------------------------------------------------
    \3\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.'').
    \4\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).
    \5\Unofficial Tr. of Nexus Issues: Hearing on H.R. 2315, the Mobile 
Workforce State Income Tax Simplification Act of 2015, H.R. 1643, the 
Digital Goods and Services Tax Fairness Act of 2015, and H.R. 2584, the 
Business Activity Tax Simplification Act of 2015: Before the Subcomm. 
on Reg. Reform, Com. and Antitrust Law of the H. Comm. on the 
Judiciary, 114th Cong. (2015)(written statement of Julie P. Magee, 
Commissioner of the Alabama Department of Revenue, at 5) [hereinafter 
the ``2015 Hearing''].
---------------------------------------------------------------------------
    A total of 41 states currently collect state income 
taxes\6\ and each has established a threshold for when an 
earner must pay such taxes and when the employer must 
withhold.\7\ The thresholds generally fall into two categories 
at which employers must begin to withhold income for state tax 
purposes: a threshold based on the number of days that the 
employee earned income in the state and a threshold based on 
the amount of income earned in the state.\8\ For example, New 
York requires withholding after an individual has worked 14 
days within the state.\9\ In contrast, Wisconsin requires 
withholding once the employee has earned at least $1,500 within 
the state.\10\
---------------------------------------------------------------------------
    \6\Mobile Workforce State Income Tax Simplification Act of 2011: 
Hearing on H.R. 1864 Before the Subcomm. on Courts, Com. and Admin. Law 
of the H. Comm. on the Judiciary, 112th Cong. 41 (2011) [hereinafter 
the ``2011 Hearing'']. The following nine states do not impose an 
individual income tax: Alaska, Florida, Nevada, New Hampshire, South 
Dakota, Tennessee, Texas, Washington, and Wyoming. Although the 
District of Columbia may tax its residents, Federal law bars it from 
taxing the income of non-residents. Pub. L. No. 93-198 (1973). But see 
Mobile Workforce State Income Tax Simplification Act of 2013: Hearing 
on H.R. 1129 Before the Subcomm. on Reg. Reform, Com. and Antirust Law 
of the H. Comm. on the Judiciary, 113th Cong. 33-39 (2014) (statement 
of Jeffrey A. Porter, Owner, Porter & Associates, CPAs, on behalf of 
the American Institute of Certified Public Accountants) (contending 
that not 41 but 43 states impose an income tax).
    \7\2015 Hearing (written statement of Doug Lindholm, President and 
Executive Director of the Council on State Taxation, at 2).
    \8\2011 Hearing at 17 (written statement of Jeffrey A. Porter, 
speaking on behalf of the American Institute of Certified Public 
Accountants).
    \9\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.
    \10\Wis. Stat. Sec. 71.64(6)(b) (2015).
---------------------------------------------------------------------------
    As a result of these differing thresholds, both states and 
employees have burdensome compliance and paperwork 
requirements,\11\ which are particularly challenging for 
employees who must travel for work.\12\ Accordingly, a solution 
that would impose a national uniform standard is urged by those 
who have encountered such difficulties.
---------------------------------------------------------------------------
    \11\2015 Hearing (written statement of Doug Lindholm, President and 
Executive Director of the Council on State Taxation, at 2).
    \12\2011 Hearing 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).
---------------------------------------------------------------------------
    H.R. 2315 seeks to address these differing standards by 
establishing a national uniform threshold. Specifically, it 
bars a state from imposing income taxes on a non-resident until 
the non-resident has worked more than 30 workdays within a 
calendar year within the state.\13\ 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.\14\ The bill defines what constitutes a workday to 
ensure that no state double counts the workday of an 
employee.\15\
---------------------------------------------------------------------------
    \13\H.R. 2315, Sec. 2(a)(2).
    \14\H.R. 2315, 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).
    \15\H.R. 2315, Sec. 2(d)(1).
---------------------------------------------------------------------------

                        CONCERNS WITH H.R. 2315

I. H.R. 2315 WILL RESULT IN MAJOR TAX REVENUE LOSSES FOR CERTAIN STATES

    H.R. 2315's 30-day threshold would allow a non-resident 
employee to work six entire business weeks (or more than ten 
percent of the year) in another state and avoid an obligation 
to pay any income taxes to that state.\16\ The Congressional 
Budget Office (CBO) stated that ``H.R. 2315 would impose an 
intergovernmental mandate as defined by the Unfunded Mandates 
Reform Act'' and result in major revenue losses of ``between 
$50 million and $100 million per year'' collectively.\17\ CBO 
estimates that ``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.''\18\ 
The State of New York itself estimates that the bill will lead 
to a tax revenue loss of between $100 million and $125 million 
starting in 2017.\19\ Of note, this ``revenue loss is greater 
than the revenue impact on all other states combined.''\20\ 
Such shortfalls in tax revenues would force states to make up 
these losses by shifting the tax burden to resident taxpayers 
through increased property, income, and sales taxes, and 
perhaps by cutting governmental services. Unfortunately, an 
amendment offered by Representatives Jerrold Nadler (D-NY) and 
Hakeem Jeffries (D-NY) that would have shortened the threshold 
to a reasonable 14 days failed by a vote of 7 to 12.\21\
---------------------------------------------------------------------------
    \16\Unofficial Tr. of Markup of H.R. 1864, the Mobile Workforce 
State Income Tax Simplification Act of 2011: Before the H. Comm. on the 
Judiciary, 112th Cong. 94 (Nov. 17, 2011) (statement of Representative 
Jerrold Nadler).
    \17\Congressional Budget Office Cost Estimate, H.R. 2315: Mobile 
Workforce State Income Tax Simplification Act of 2015 (July 21, 2015). 
The Unfunded Mandates Reform Act is intended to curb the practice of 
imposing Federal mandates on state and local governments without 
adequate funding. Unfunded Mandates Reform Act of 1995, Pub. L. No. 
104-4, 109 Stat. 48 (1995).
    \18\Id. The ranges of revenue losses for New York exceed the range 
of overall losses for the states collectively because ``states tax 
income at different rates and on different tax bases, the changes in 
tax revenues nationwide would not net to zero.'' Id.
    \19\Letter from Jerry Boone, Commissioner of the Department of 
Taxation and Finance, State of New York, to Speaker John Boehner, 
Minority Leader Nancy Pelosi, Representative Bob Goodlatte, Chairman of 
the House Committee on the Judiciary, & Representative John Conyers, 
Jr., Ranking Member of the House Committee on the Judiciary (July 8, 
2015) (on file with the H. Comm. on the Judiciary, Democratic Staff). 
In his letter, Commissioner Boone details how his office calculated 
that figure:

    GOur estimate is constructed through a simulation of actual New 
York State nonresident tax returns from tax year 2012. Nonresident 
wages, the base of the estimate, are grown to tax year 2017 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.
---------------------------------------------------------------------------
    \20\Id.
    \21\2015 Markup at 40.
---------------------------------------------------------------------------

       II. H.R. 2315 HINDERS ENFORCEMENT OF INCOME TAX COLLECTION

    H.R. 2315 also could prohibit an employer from withholding 
an employee's income taxes owed to a non-resident state. 
Section 2(c) of the bill provides that--for purposes of 
determining an employer's obligation to withhold state income 
taxes for an employee--an employer may rely on the employee's 
determination of the time the employee is expected to spend in 
another state during the year.\22\ Thus, if the employee does 
not inform his or her employer about expecting to spend more 
than 30 work days during the calendar year in another state, 
this provision effectively prevents the employer from 
withholding an employee's state income taxes to a non-resident 
state. ``This is true even if the employer is aware that the 
employee has been working in a state more than 30 days, as long 
as that state cannot prove that the employee committed fraud in 
making his annual determination and that the employer knew 
it.''\23\ As a result, H.R. 2315 undermines enforcement of 
state income tax collection.
---------------------------------------------------------------------------
    \22\H.R. 2315, Sec. 2(c).
    \23\MTC Letter.
---------------------------------------------------------------------------

                               CONCLUSION

    Although real problems are presented for both states and 
employees as the result of disparate state employment tax 
withholding criteria, H.R. 2315 is not the solution. We cannot 
support legislation that will cause states to incur significant 
revenue losses, which the bill in its current form would do. 
Nevertheless, had the amendment to H.R. 2315, which would have 
shortened the threshold period to 14 days been accepted, we 
could have supported this revised version of the legislation 
because it would have lessened its impact on state revenues 
while still providing the certainty proponents of the 
legislation seek. Absent a more reasonable threshold, we must 
oppose the bill as ordered reported by the Committee.

                                   Mr. Conyers, Jr.
                                   Mr. Nadler.
                                   Ms. Chu.
                                   Mr. Jeffries.

                                 [all]