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Congress May Vote on Bill Limiting State Taxation of Business Travelers

1 min readBy: Joseph Bishop-Henchman

We’ve gotten word that the House of Representatives may consider H.R. 1864 this week, the Mobile Workforce State Income TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Simplification Act. The bill would prohibit states from imposing income taxes on traveling workers unless they spend at least 30 days in the state. Currently, most states require tax payments and even tax withholdingWithholding is the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local government. It is calculated based on the amount of income earned, the taxpayer’s filing status, the number of allowances claimed, and any additional amount of the employee requests. for workers in the state for much shorter periods of time, including as little as a day. (In that map below from the Council on State Taxation (PDF link), that’s the red states.)

Such practices disrupt interstate commerce and falsely suggest that business travelers earn their income in traveling states and not from the home office. In recent hearings, Congress has shown its outrage at these state practices. Because of the tax credit for taxes paid to another state, this just shifts money around the country, toward states with the most aggressive rules. We’re hearing more and more stories about state tax departments auditA tax audit is when the Internal Revenue Service (IRS) conducts a formal investigation of financial information to verify an individual or corporation has accurately reported and paid their taxes. Selection can be at random, or due to unusual deductions or income reported on a tax return. ing travel records.

We’ll update with more on the progress of the Mobile Workforce bill.