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House Committee Approves Bill Limiting State Tax Overreaching for Business Taxes

1 min readBy: Joseph Bishop-Henchman

The House Judiciary Committee today approved the Business Activity 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 (BATSA) on a bipartisan voice vote. The bill, H.R. 1439, would establish that businesses could only be subject to corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. and business activity taxes in states where they have property and employees for at least 15 days in a year. The measure now moves to the full House of Representatives.

This “physical presence” standard is the historical norm, but many states have recently pushed for “economic presence” standards, which tax businesses on a variety of different thresholds based on where customers are located, sales occur, goods or services travel through the state, or other actions.

Co-sponsors Rep. Bob Goodlatte (R-VA) and Rep. Bobby Scott (D-VA) spoke in favor of the measure. Rep. Judy Chu (D-CA), a former member of California’s tax administration board, proposed an amendment that would change the legislation’s effective date from 2012 to 2022. Six Democrats joined all present Republicans to reject the amendment. A voice vote occurred by similar margins to reject an amendment to strike the de minimis 15 day threshold.

I testified to a House subcommittee in April on this proposal and others to limit state tax overreaching that harms interstate commerce.