A coalition of businesses and CPAs is calling on Congress to finally enact a provision to standardize the taxation of mobile and remote workers.
In a letter to congressional leaders, the American Institute of CPAs and the Council On State Taxation said any new COVID-19 package should include relief for remote workers.
The coalition suggested including provisions from the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act — the COVID-19 package put forward by Senate Republicans in July — and the Remote and Mobile Worker Relief Act (S. 3995).
Remote worker provisions in both packages “are a top priority for coalition members and will help all employers with remote and mobile employees who are either working remotely or travel temporarily for work in other states,” the letter said.
It has been a longtime goal for some lawmakers and COST to have a single, national standard for traveling employees. The measures suggested by the coalition would exempt workers from filing income tax returns in a state where they worked for 30 or fewer days. They would also extend the exemption to 90 days during the COVID-19 pandemic.
The coalition said that after “over ten years of good faith negotiations with state government officials, the time has come for this legislation to become federal law.”
Lawmakers included in the relief packages proposals to clarify how remote workers should be taxed during the pandemic. The legislation dictates that the taxing jurisdiction of an employee is that of the employer regardless of where the employee is located while working remotely during the pandemic. It also clarifies that no nexus or minimum contact is created by an employee working in a state for an out-of-state business during the pandemic.
Limited Support
Creating uniform tax rules for remote and traveling workers has bipartisan and bicameral support. It found its way into the HEALS Act via Senate Republican Whip and Finance Committee member John Thune of South Dakota. But it does not stand high on the priority list for Democrats, even though it has been championed by Finance Committee member Sherrod Brown of Ohio for the past decade.
It is also likely to face opposition from several New York lawmakers, including Senate Minority Leader Charles E. Schumer, whose state faces a revenue loss and wants to continue to tax workers temporarily in New York during the pandemic.
But New York isn’t the only state opposed to such a rule. Verenda Smith, Federation of Tax Administrators deputy director, told Tax Notes that there is general opposition to the federal government intervening in the matter.
“There is a huge difference between a state passing its own tax law and a federal preemption,” she said, adding that it could cause problems for states. “A lot of people don’t care about unintended consequences, but they are what keep me awake at night,” Smith said.
Another issue that states want resolved is the lack of concrete numbers in a federal proposal. “There is no dollar limit to the withholding or the taxation,” Smith said.
Lawmakers are due back in Washington after Labor Day weekend to continue their discussions over the next relief package. The two sides remain far apart, House Speaker Nancy Pelosi, D-Calif., said August 27 after speaking with White House Chief of Staff Mark Meadows earlier in the day.
“The administration’s continued failure to acknowledge the funding levels that experts, scientists, and the American people know is needed leaves our nation at a tragic impasse,” Pelosi said.