Report text available as:

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




115th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                      {      115-180

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



 
      MOBILE WORKFORCE STATE INCOME TAX SIMPLIFICATION ACT OF 2017

                                _______
                                

 June 15, 2017.--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. 1393]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1393) 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.........................................................     6
Committee Consideration..........................................     6
Committee Votes..................................................     6
Committee Oversight Findings.....................................     7
New Budget Authority and Tax Expenditures........................     7
Congressional Budget Office Cost Estimate........................     7
Performance Goals and Objectives.................................     9
Advisory on Earmarks.............................................     9
Section-by-Section Analysis......................................     9
Dissenting Views.................................................    10

                          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 30 days 
or fewer in a calendar 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 fifty-nine days in Arizona, 
fifteen days in New Mexico, and fourteen 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 one day. Examples include 
New York, even though the state obligates employers to withhold 
wages only after fourteen 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), 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 
ten 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. Georgia, for example, has a three-part test 
looking at whether an employee has worked there for twenty-
three days in a calendar quarter, whether more than five 
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 $5,000.\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 also 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, supra note 1, 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).
---------------------------------------------------------------------------

  I. 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 more than thirty 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 cross 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 voluntarily uses a time and attendance system to 
track its employees' whereabouts.\17\
---------------------------------------------------------------------------
    \16\Id. Sec. 2(b).
    \17\Id. Sec. 2(c).
---------------------------------------------------------------------------
    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, in most situations even a 
highly-paid employee's temporary presence in a foreign state is 
typically incidental to that employee's job. In a change from 
prior versions of the bill, the professional entertainer 
exemption is narrowed from a ``person who performs services'' 
to a ``person of prominence who performs services'' in order to 
ensure that other entertainers retain the benefit of the bill's 
protections.
---------------------------------------------------------------------------
    \18\Id. Sec. 2(d)(2).
---------------------------------------------------------------------------
    Finally, new language in H.R. 1393 expands the list of 
exclusions to cover a fourth category, ``qualified production 
employees.'' Like professional entertainers and athletes, these 
employees also earn income from their work in specific states, 
many of which offer tax credits for local productions. The new 
language excludes these employees, who perform services in 
connection with film, television or other video productions, if 
the associated tax credits are contingent on withholding wages 
earned in the state.

                           II. OTHER CONCERNS

    Some state revenue departments have suggested that the bill 
is inconsistent with the source principle that income should be 
taxed where it is earned. The bill, however, is intended simply 
to bring uniformity to a small set of de minimis exceptions, in 
order to reduce compliance costs. Nor is it clear that income 
is earned in a state just because an employee is there. For 
example, if an Illinois businessman flies to Manhattan to sign 
a deal with a New York City developer to acquire a building in 
Florida, it is fair to question whether the associated income 
is earned more in New York than in Florida or Illinois.
    Indeed, an analysis from Ernst & Young, LLP, who 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 one 
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), http://
www.cost.org/WorkArea/DownloadAsset.aspx?id=90612.
---------------------------------------------------------------------------
    The Committee has been informed of an industry estimate 
that New York may lose between $50 and $100 million in revenue 
after enactment of the bill. But the bill does not 
significantly alter the overall amount of income tax collected. 
The size of the pot remains virtually the same. It is the 
apportionment that differs, which is appropriate in order to 
reduce compliance burdens and retain sensible limits on state 
regulatory authority over nonresidents.
    The Committee is also aware 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 raised a number of arguments centered 
on potential fraud and gaming of the system.\21\ For example, 
concerns were raised over provisions permitting employers to 
rely on employees' estimates of time spent in other 
jurisdictions. This ``voluntary reporting'' was claimed not to 
have 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 2017, 
H.R. 1393 Sec. 2(c), 115th Congress (2017).
---------------------------------------------------------------------------
    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 days' wages) is 
minimal. Second, except in nine states, the employee will have 
to pay the tax in any event to the employee's home state, so 
the only savings would be from minor rate differentials between 
the two jurisdictions.

                                Hearings

    The Committee did not hold a hearing on H.R. 1393. However, 
this bill is nearly identical to the House-passed version of 
the Mobile Workforce State Income Tax Simplification Act of 
2015 (H.R. 2315). The Committee's Subcommittee on Regulatory 
Reform, Commercial, and Antitrust Law held one day of hearings 
on that and other tax bills on June 2, 2015. Testimony was 
received from Mr. Grover Norquist, President, Americans for Tax 
Reform; Mr. Douglas L. Lindholm, CEO & Executive Director, 
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 March 22, 2017, the Committee met in open session and 
ordered the bill H.R. 1393 favorably reported, without 
amendment, by a roll call vote of 19-2, 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 roll call votes occurred during the Committee's 
consideration of H.R. 1393:
    1. Motion to report H.R. 1393 favorably to the House. 
Agreed to by a rollcall vote of 19 to 2.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................      X
Mr. Issa (CA)..................................
Mr. King (IA)..................................
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................      X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................      X
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................      X
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................
Mr. Collins (GA)...............................
Mr. DeSantis (FL)..............................
Mr. Buck (CO)..................................      X
Mr. Ratcliffe (TX).............................      X
Ms. Roby (AL)..................................      X
Mr. Gaetz (FL).................................
Mr. Johnson (LA)...............................      X
Mr. Biggs (AZ).................................      X
 
Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................              X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................      X
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Mr. Jeffries (NY)..............................
Mr. Cicilline (RI).............................      X
Mr. Swalwell (CA)..............................      X
Mr. Lieu (CA)..................................
Mr. Raskin (MD)................................
Ms. Jayapal (WA)...............................
Mr. Schneider (IL).............................      X
                                                ------------------------
    Total......................................     19       2
------------------------------------------------------------------------

                      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. 1393, 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, April 10, 2017.
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. 1393, the Mobile 
Workforce State Income Tax Simplification Act of 2017.
    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. 1393--Mobile Workforce State Income Tax Simplification Act of 
                                 2017.


      As ordered reported by the House Committee on the Judiciary
                           on March 22, 2017.




    H.R. 1393 would establish consistent criteria for states to 
determine state taxation and employer withholding for 
nonresidents who work in a state. CBO estimates that enacting 
H.R. 1393 would have no direct effect on the federal budget. 
Enacting H.R. 1393 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 1393 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 1393 would impose an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) by 
prohibiting a state 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, some production employees, 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.
    Because 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 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, Illinois, Massachusetts, California, and New York 
would face losses, with New York probably losing the largest 
amount of revenue--between $55 million and $120 million per 
year, according to state and industry estimates. 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 net revenues by $55 million to $100 million 
per year beginning in 2020, the first full year that the bill's 
changes would be in effect. That range stems 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 
endeavors to develop estimates that are in the middle of a 
range of possible outcomes. On that basis, CBO has determined 
that the net cost of the intergovernmental mandate would be $78 
million in 2020 and thus would not exceed the annual threshold 
established in UMRA in any of the first five years that the 
mandate becomes effective. (In 2017 the threshold is $78 
million, and it is adjusted annually for inflation; in 2020, 
the threshold would be $84 million.)
    H.R. 1393 contains no private-sector mandates as defined in 
UMRA.
    The CBO staff contacts for this estimate are Aurora Swanson 
(for federal costs) and Rachel Austin (for intergovernmental 
mandates). This estimate was approved H. Samuel Papenfuss, 
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. 
1393, provides a clear, uniform framework 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. 1393 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. Provides that the bill may be cited 
as the ``Mobile Workforce State Income Tax Simplification Act 
of 2017.''

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 or reporting 
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 known employee 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 determine penalties related to the employers' withholding 
and reporting 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) Working 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 
        employee's state of residence and in one nonresident 
        state during that day, it is counted as a nonresident 
        day regardless of the time spent in each. Transit time 
        is excluded from these calculations.
          (2) ``Employee'' is defined according to state law 
        consistent with state sovereignty principles. The term 
        does not include a professional athlete, entertainer, 
        qualified production employee, or certain public 
        figures.
          (4) ``Professional Entertainer'' is defined as a 
        ``person of prominence who performs services in the 
        professional performing arts . . . on a per-event 
        basis'' and whose remuneration is for providing such 
        services.
          (5) ``Qualified Production Employee'' is defined as a 
        person who provides production services in connection 
        with a state approved film, television or other 
        commercial video production whose wages must be 
        withheld as a condition of such production costs 
        qualifying for the state's film incentive program.
          (6) ``Certain Public Figures'' are defined as persons 
        of prominence who perform services in the nature of a 
        speech, public appearance, or similar event on a per-
        event basis and whose remuneration is for performing 
        such services.
          (7) ``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.
          (9) ``Time and Attendance System'' means a system 
        that requires employees to record, contemporaneously, 
        any out-of-state locations where they work, if designed 
        and used by their employer to allocate employees' wages 
        among states for income tax purposes.
          (10) ``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 calendar year after the 
date of enactment and does not apply to any tax obligation 
accrued before that date.

                            Dissenting Views

    We agree with the sponsors of H.R. 1393, the ``Mobile 
Workforce State Income Tax Simplification Act of 2017,'' that a 
uniform framework specifying when an employer must withhold 
state income tax could help ensure simplicity and be more 
administrable than the current varied state standards.\1\ 
However the means by which H.R. 1393 achieves this result 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 
Federation of Tax Administrators, and the Multistate Tax 
Commission.\2\
---------------------------------------------------------------------------
    \1\See e.g., Unofficial Tr. of Markup of H.R. 1393, the Mobile 
Workforce State Income Tax Simplification Act of 2017, H.R. 695, the 
Child Protection Improvements Act of 2017, H.R. 883, the Targeting 
Child Predators Act of 2017, and H.R. 1188, the Adam Walsh 
Reauthorization Act of 2017: Before the H. Comm. on the Judiciary, 
115th Cong. 76-78 (March 22, 2017) (statement of Chairman Bob Goodlatte 
(R-VA)) [hereinafter ``2017 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, 
Amalgamated Transit Union, Communications Workers of America, 
International Association of Firefighters, International Federation of 
Professional and Technical Engineers, International Union, United 
Automobile, Aerospace and Agricultural Implement Workers of America, 
International Union of Police Associations, National Education 
Association, Service Employees International Union, (March 21, 2017) 
(on file with the H. of Representatives Comm. on the Judiciary, 
Democratic Staff); Letter from Dawn Cash, President of the Federation 
of Tax Administrators Board of Trustees and Commissioner of the 
Oklahoma 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 (March 13, 2017) (on file with 
the H. Comm. on the Judiciary Democratic staff); Letter from Gregory S. 
Matson, Executive Director 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 (March 13, 2017) (on file with the H. Comm. on 
the Judiciary Democratic staff) [hereinafter ``MTC Letter''].
---------------------------------------------------------------------------
    For these reasons we must respectfully dissent and oppose 
H.R. 1393.

                       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 may be 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 de minimus threshold, based on the number of days 
that the employee earned income in the state, and a physical 
presence 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. 1393 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 individuals with certain professions 
(e.g., professional athletes, prominent entertainers, qualified 
production employees 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. 1393, Sec.  2(a)(2).
    \14\H.R. 1393, 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. 1393, Sec.  2(d)(1).
---------------------------------------------------------------------------

                        CONCERNS WITH H.R. 1393

I. H.R. 1393 WILL RESULT IN MAJOR TAX REVENUE LOSSES FOR CERTAIN STATES

    H.R. 1393'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. 1393 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 ``Illinois, Massachusetts, California and New 
York would face losses, with New York probably losing the 
largest amount of revenue--between $55 million and $120 million 
per year, according to state and industry estimates''\18\ The 
State of New York itself estimates that the bill will lead to a 
tax revenue loss of between $95 million and $120 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, the 
Committee rejected an amendment, offered by Representative 
Jerrold Nadler (D-NY) during the markup of the legislation, 
which would have shortened the threshold to a reasonable 14 
days.\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. 1393: Mobile 
Workforce State Income Tax Simplification Act of 2017 (April 10, 2017). 
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 Nonie Manion, Executive Deputy Commissioner, 
Department of Taxation and Finance, State of New York, to 
Representative Bob Goodlatte, Chairman, House Comm on the Jud., and 
Representative John Conyers, Jr., Ranking Member, House Comm. on the 
Jud. (March 20, 2017) (on file with the H. Comm. on the Judiciary, 
Democratic Staff). In his letter, Commissioner Boone 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 2014. Nonresident wages, 
the base of the estimate, are grown to tax year 2019 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\2017 Markup at 98.
---------------------------------------------------------------------------

       II. H.R. 1393 HINDERS ENFORCEMENT OF INCOME TAX COLLECTION

    H.R. 1393 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. As concerned stakeholders have highlighted, ``[e]ven if 
the employer knows where the employee has worked more than 30 
days based on its own records, the employer may still rely on 
the employee's advance estimate; this and the immediately 
preceding rule would allow an employee to knowingly 
underestimate the expected time in-state to avoid tax, and the 
employer could not be held to account if it turns a blind eye, 
i.e. avoids actual knowledge of fraud or collusion''\23\ As a 
result, H.R. 1393 undermines enforcement of state income tax 
collection.
---------------------------------------------------------------------------
    \22\H.R. 1393, Sec.  2(c).
    \23\MTC Letter.
---------------------------------------------------------------------------

                               CONCLUSION

    Disparate state employment tax withholding criteria present 
real challenges for both states and employees. However we 
cannot support legislation that in its attempt to address these 
challenges will incidentally cause states to incur significant 
revenue losses. The amendment offered by Representative Nadler, 
which proposed to shorten the threshold period to 14 days, 
would have lessened this impact on state revenues while still 
providing the certainty proponents of the legislation seek. Had 
that change been made to the legislation we could have 
supported it. Unfortunately, absent a more reasonable 
threshold, we must oppose H.R. 1393.

                                   Mr. Conyers, Jr.
                                   Mr. Nadler.
                                   Mr. Jeffries.

                                  [all]