Mobile Workforce Alert

Employers with employees who work in multiple states are often frustrated by the administrative burden and cost of compliance associated with proper multistate payroll tax withholding and compliance. It is equally burdensome for the employees, who are required to file returns in multiple states to meet their own state tax compliance burdens.

On September 21, 2016, the U.S. House of Representatives passed H.R. 2315, the Mobile Workforce State Income Tax Simplification Act of 2015. Supporters of the bill believe the law provides a reasonable solution to the myriad of state income tax withholding laws—and varying de minimis exemption periods—that make compliance extremely difficult and time consuming for employers and their employees.

If it becomes law, H.R. 2315 would require that an employee’s earnings be subject to state income tax and withholding when the employee performs work in a state for more than 30 days during the calendar year. Supporters believe that having a uniform national standard would significantly simplify compliance with all of the different states’ laws.

While many in the business community will be encouraged by the news, it remains to be seen what action will be taken by the Senate on this matter. If the bill becomes law, it would take effect January 1 of the second year after the date of enactment. In other words, if passed this year, the bill would take effect in January 2018. The impact the recent presidential election will have on this particular bill is uncertain. It’s unlikely any action will be taken on this bill by the end of 2016.