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The Surprise Provision to Help Traveling Workers With Their Taxes

Posted on July 31, 2020

A provision in Senate Republicans’ coronavirus relief package that would standardize the taxation of mobile workers came as a surprise to its biggest Democratic proponent.

Senate Finance Committee member Sherrod Brown, D-Ohio, told Tax Notes that he didn’t expect to see the Remote and Mobile Worker Relief Act (S. 3995) included in the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act that was rolled out by Republicans July 27.

“It was a surprise to me,” Brown said.

Brown, who cosponsored the mobile worker measure with fellow Finance Committee member John Thune, R-S.D., has been a proponent of standardizing state tax obligations of traveling workers for almost a decade, and was encouraged that the provision made it into the package. “There isn’t much I like in that bill [HEALS Act], but I do hope this stays in,” he said.

Thune took the lead on the issue and said that creating a 30-day tax threshold for traveling workers, increased to 90 days during the pandemic, was a simple way of helping taxpayers without increasing the deficit. Thune, who serves as Republican whip, spoke on the Senate floor several times to urge his colleagues to back his efforts to standardize the taxation of traveling workers, and did the same in an op-ed in The Wall Street Journal.

The proposal in the HEALS Act goes further than prior mobile tax simplification bills by clarifying how remote workers should be taxed during the pandemic. The bill dictates that the taxing jurisdiction of an employee is that of the employer regardless of where the employee is while working remotely during the pandemic.

Most States on Board

Efforts to pass the mobile worker bill have been backed by large corporations and have generally been popular among lawmakers. There also isn’t much pushback among states on the issue.

“Most states are fine with it; the one that isn’t is New York,” Douglas L. Lindholm, president and executive director of the Council On State Taxation, told Tax Notes.

New York has one of the most aggressive taxing schemes for traveling workers and views the bill as a hit to its budget. That’s the main reason New York Democrats like Senate Minority Leader Charles E. Schumer and House Judiciary Chair Jerrold Nadler have opposed the measure.

Lindholm noted that a carveout in the bill designed to soften the perceived blow to New York’s budget would exempt qualified production employees like those involved in the production of movies and television shows.

COST, which advocates on behalf of some of the largest companies in the country on multistate tax issues, has been pushing for a solution to a complicated system that isn’t heavily enforced by all states. Lindholm said the bill would be a start to a solution.

“It is one that helps companies and states comply with a system that’s completely out of whack. It provides an adequate safe harbor for 30 days, and it’s not a giveaway,” Lindholm said.

Not a Top Priority

Despite his long-standing push to create uniformity in the way states tax traveling workers, Brown said the relief package should be focused on more pressing needs, such as unemployment insurance, housing assistance, and safe school openings.

“It’s not one of the major points of discussion with everything else going on,” Brown said. “It matters to me, but it’s not in the top three.”

Brown said that while he’s spoken with Schumer about the matter over the years, he hasn’t recently and hasn’t brought it up with House Speaker Nancy Pelosi, D-Calif., either. “There is not a lot of discussion about it elsewhere,” Brown said when asked if he has been talking about it with colleagues in his caucus.

But to those who have been trying to create a solution to this complicated state tax issue, it is clear that Congress needs to step in. “It’s a tax that crosses state borders, so you need states to be on the same page,” Lindholm said.

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