Calls To Simplify US State Tax Rules
In the United States, the American Institute of CPAs and the Council on State Taxation have urged Congress to pass legislation to simplify state tax rules for remote and mobile workers.
In a joint letter to congressional leaders, dated August 27, 2020, AICPA and COST said lawmakers should focus on the Remote and Mobile Worker Relief Act of 2020, and a particular section of the American Workers, Families and Employers Assistance Act, in any final COVID-19 relief package.
Under current law, non-resident employees who visit a state for as little as 24 hours to do work can be subject to certain state income tax laws. Businesses must also comply with states’ varying withholding requirements with regards to employees who travel out of state for work purposes.
However, under the Remote and Mobile Worker Relief Act 2020, introduced in the Senate on June 18, 2020, no part of the wages or other remuneration earned by an employee who performs employment duties in more than one taxing jurisdiction would be subject to income tax in any taxing jurisdiction other than the that of the employee’s residence; and the taxing jurisdiction within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.
Section 403 of the American Workers, Families and Employers Assistance Act, introduced on July 27, 2020, should also be included in any new COVID-19 economic support package, AICPA and COST have argued. This section would create uniform procedures for assessing state and local income taxes on remote and mobile workers affected by government shutdown orders due to the COVID-19 pandemic. Under the provision, through December 31, 2024, employees who perform employment duties in multiple states would be subject to income tax only in their state of residence and any states in which they are present and performing employment duties for more than a limited time during the calendar year.
Both bills are in the first stages of the legislative process, having been read twice and referred to the Senate Committee on Finance.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look