Mobile Workforce Bill Speaks
for Small Businesses
By Alice P. Jacobsohn, Esq.
Representative Tim Huelskamp (R-Kansas) set the tone at a hearing of the House Committee on Small Business, Subcommittee on Economic Growth, Tax, and Capital Access, with this opening statement: "Employers with more than 50 employees face a tax compliance burden of somewhere between $182 and $191, while the smallest employers with one to five employees spend between $4,308 and $4,736 per employee. Some of this difference results from economies of scale, but the difference is still astronomical."
The April 13 hearing, "Keep It Simple: Small Business Tax Simplification and Reform, Main Street Speaks," included testimony on H.R. 2315, the Mobile Workforce State Income Tax Simplification Act, a bill the American Payroll Association (APA) supports.
Testifying on behalf of the Mobile Workforce Coalition, Troy Lewis of the American Institute of CPAs said, "The (mobile workforce) bill prohibits states from taxing most nonresident employees ... unless the employee is present and performing employment duties for more than 30 days during the calendar year. Furthermore, employees would not be subject to state income tax withholding and reporting requirements unless their income is subject to taxation."
Lewis emphasized the need for long overdue relief from inconsistent state income tax and withholding rules. The coalition is a group of nearly 300 businesses and organizations, including APA, that supports H.R. 2315 and the Senate version, S. 386.
The coalition provided subcommittee representatives with background information on the problem:
The state personal income tax treatment of nonresidents is inconsistent and often bewildering. Currently, 41 states plus the District of Columbia impose a personal income tax on wages, and there are many different requirements for withholding income tax for nonresidents among those states. There are seven states that currently do not assess a personal income tax, and two states that do not tax wages and only tax interest and dividends of individuals. Employees traveling into other states are subject to myriad complex withholding and tax rules for nonresident taxpayers.
After considering the cost for processing nonresident tax returns, APA and its coalition partners believe that a state receives only a minimal benefit, if any, from the filing of a return for just a few days of earnings while an employee is in a state. Yet the administrative burden on payroll professionals and their employers to determine whether a tax is owed is significant.
Representative Mike Bishop (R-Michigan), who is not a member of the Committee on Small Business, attended the hearing to add his comments about H.R. 2315 to the record.
Bishop, the primary sponsor of the bill, said, "The mobile workforce tax burden is significant. The modern economy requires crossing state lines, and our tax laws need to follow suit. Employers' hard-earned resources should go to hiring and expanding business, not paying taxes."
The mobile workforce bill is not officially before the Subcommittee on Economic Growth, Tax, and Capital Access; however, Chairman Huelskamp wanted to bring some attention to the issue. Taxes associated with the mobile workforce are part of a larger issue -- the overall administrative burden on small businesses from all taxes. Representative Judy Chu (D-California), a ranking member of the subcommittee, stated that the process for determining taxes on small businesses is too complex.
"Employers spend significant time just figuring out their taxes," she said.
Chu also noted the IRS's limited resources to respond to small businesses, leaving employers to fend for themselves in determining their taxes.
At the end of the hearing, Huelskamp urged his fellow representatives to sponsor H.R. 2315.
APA members interested in encouraging support for the mobile workforce bill can ask their senators and representative to sponsor the bill. Even if your Congress members are already sponsors, letters from constituents will keep up the pressure for bill passage.