Senate Bill Introduced to Limit State Taxation of Telecommuters in Other States
November 10, 2011
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 taxes on telecommuting nonresident individuals who are actually physically present in another state.
Given that one of the primary justifications of taxation 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.