News & Insights

Multistate Employers May See Simplified State Income Tax System

Tax Development Jun 21, 2017

On June 20, the Mobile Workforce State Income Tax Simplification Act (H.R. 1393) was passed by a voice vote in the House of Representatives. The bill will now move to the Senate for review.

As the name implies, the Act would provide multistate employers with a simplified system for administering the patchwork of state income taxes by creating a uniform, national set of rules for income taxes and income tax withholding. For example, nonresident employees would not be subject to state income tax in a state where they work less than 30 or fewer days in a year. Instead, the employee would be subject to income tax in their state of residence during that time. As a result, their employers would not be required to withhold income tax until employees pass the 30-day threshold in a nonresident state. This simplification would reduce the administrative burden of the present system, in which each state creates its own rules for when a nonresident is subject to income tax, requiring employers to keep track of an assortment of guidelines on a state-by-state basis. In the modern, mobile economy, this new system could provide significant savings for employers.

The House has previously passed two other versions of the Act, once in 2012 (112th Session, H.R. 1864) and again in 2016 (114th Session, H.R. 2315), but neither gained much traction in the Senate. Currently, there are more than 300 multinational and diverse employers in the United States supporting the legislation, urging its passage in this legislative session. 

TECHNICAL INFORMATION CONTACT:

Aaron Babb
Manager
Ryan
216.685.9448
aaron.babb@ryan.com