On Tuesday, Senators Joe Lieberman (I-CT) and Richard Blumental (D-CT) introduced the S. 1811, Telecommuter Tax Fairness Act, which would prevent states from imposing individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es on telecommuting nonresident individuals who are actually physically present in another state.
Given that one of the primary justifications of 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. ation is to pay for the services used and enjoyed by residents of a state, it seems inappropriate to collect taxes from people who never set foot in the jurisdiction.
The meat of the bill:
Sec. 127. Limitation on State taxation of compensation earned by nonresident telecommuters
(a) In General- In applying its income tax laws to the compensation of a nonresident individual, a State may deem such nonresident individual to be present in or working in such State for any period of time only if such nonresident individual is physically present in such State for such period and such State may not impose nonresident income taxes on such compensation with respect to any period of time when such nonresident individual is physically present in another State.
(b) Determination of Physical Presence- For purposes of determining physical presence, no State may deem a nonresident individual to be present in or working in such State on the grounds that–
(1) such nonresident individual is present at or working at home for convenience, or
(2) such nonresident individual’s work at home or office at home fails any convenience of the employer test or any similar test.
(c) Determination of Periods of Time With Respect to Which Compensation Is Paid- For purposes of determining the periods of time with respect to which compensation is paid, no State may deem a period of time during which a nonresident individual is physically present in another State and performing certain tasks in such other State to be–
(1) time that is not normal work time unless such individual’s employer deems such period to be time that is not normal work time,
(2) nonworking time unless such individual’s employer deems such period to be nonworking time, or
(3) time with respect to which no compensation is paid unless such individual’s employer deems such period to be time with respect to which no compensation is paid.Share