Multi-State Worker Tax Fairness Act of 2021

II 117TH CONGRESS 1ST SESSION S. 1887 To amend title 4 of the United States Code to limit the extent to which States may tax the compensation earned by nonresident telecommuters and other multi-State workers. IN THE SENATE OF THE UNITED STATES MAY 27, 2021 Mr. BLUMENTHAL (for himself, Ms. HASSAN, Mrs. SHAHEEN, and Mr. MUR- PHY) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title 4 of the United States Code to limit the extent to which States may tax the compensation earned by nonresident telecommuters and other multi-State workers. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Multi-State Worker 4 Tax Fairness Act of 2021’’. 5 VerDate Sep 11 2014 05:00 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1887.IS S1887 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1887 IS SEC. 2. LIMITATION ON STATE TAXATION OF COMPENSA- 1 TION EARNED BY NONRESIDENT TELECOM- 2 MUTERS AND OTHER MULTI-STATE WORK- 3 ERS. 4 (a) IN GENERAL.—Chapter 4 of title 4, United 5 States Code, is amended by adding at the end the fol- 6 lowing: 7 ‘‘§ 127. Limitation on State taxation of compensation 8 earned by nonresident telecommuters 9 and other multi-State workers 10 ‘‘(a) IN GENERAL.—In applying its income tax laws 11 to the compensation of a nonresident individual, a State 12 may deem such nonresident individual to be present in or 13 working in such State for any period of time only if such 14 nonresident individual is physically present in such State 15 for such period and such State may not impose non- 16 resident income taxes on such compensation with respect 17 to any period of time when such nonresident individual 18 is physically present in another State. 19 ‘‘(b) DETERMINATION OF PHYSICAL PRESENCE.— 20 For purposes of determining physical presence, no State 21 may deem a nonresident individual to be present in or 22 working in such State on the grounds that— 23 ‘‘(1) such nonresident individual is present at 24 or working at home for convenience, or 25 VerDate Sep 11 2014 05:00 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1887.IS S1887 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1887 IS ‘‘(2) such nonresident individual’s work at 1 home or office at home fails any convenience of the 2 employer test or any similar test. 3 ‘‘(c) DETERMINATION OF PERIODS OF TIME WITH 4 RESPECT TO WHICH COMPENSATION IS PAID.—For pur- 5 poses of determining the periods of time with respect to 6 which compensation is paid, no State may deem a period 7 of time during which a nonresident individual is physically 8 present in another State and performing certain tasks in 9 such other State to be— 10 ‘‘(1) time that is not normal work time unless 11 such individual’s employer deems such period to be 12 time that is not normal work time, 13 ‘‘(2) nonworking time unless such individual’s 14 employer deems such period to be nonworking time, 15 or 16 ‘‘(3) time with respect to which no compensa- 17 tion is paid unless such individual’s employer deems 18 such period to be time with respect to which no com- 19 pensation is paid. 20 ‘‘(d) DEFINITIONS.—As used in this section— 21 ‘‘(1) COMPENSATION.—The term ‘compensa- 22 tion’ means the salary, wages, or other remuneration 23 earned by an individual for personal services per- 24 VerDate Sep 11 2014 05:00 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1887.IS S1887 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1887 IS formed as an employee or as an independent con- 1 tractor. 2 ‘‘(2) EMPLOYEE.—The term ‘employee’ means 3 an employee as defined by the State in which the 4 nonresident individual is physically present and per- 5 forming personal services for compensation. 6 ‘‘(3) EMPLOYER.—The term ‘employer’ means 7 the person having control of the payment of an indi- 8 vidual’s compensation. 9 ‘‘(4) INCOME TAX.—The term ‘income tax’ has 10 the meaning given such term by section 110(c). 11 ‘‘(5) INCOME TAX LAWS.—The term ‘income 12 tax laws’ includes any statutes, regulations, adminis- 13 trative practices, administrative interpretations, and 14 judicial decisions. 15 ‘‘(6) NONRESIDENT INDIVIDUAL.—The term 16 ‘nonresident individual’ means an individual who is 17 not a resident of the State applying its income tax 18 laws to such individual. 19 ‘‘(7) STATE.—The term ‘State’ means each of 20 the several States (or any subdivision thereof), the 21 District of Columbia, and any territory or possession 22 of the United States. 23 ‘‘(e) NO INFERENCE.—Nothing in this section shall 24 be construed as bearing on— 25 VerDate Sep 11 2014 05:00 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1887.IS S1887 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1887 IS ‘‘(1) any tax laws other than income tax laws, 1 ‘‘(2) the taxation of corporations, partnerships, 2 trusts, estates, limited liability companies, or other 3 entities, organizations, or persons other than non- 4 resident individuals in their capacities as employees 5 or independent contractors, 6 ‘‘(3) the taxation of individuals in their capac- 7 ities as shareholders, partners, trust and estate 8 beneficiaries, members or managers of limited liabil- 9 ity companies, or in any similar capacities, and 10 ‘‘(4) the income taxation of dividends, interest, 11 annuities, rents, royalties, or other forms of un- 12 earned income.’’. 13 (b) CLERICAL AMENDMENT.—The table of sections 14 of such chapter 4 is amended by adding at the end the 15 following new item: 16 ‘‘127. Limitation on State taxation of compensation earned by nonresident tele- commuters and other multi-State workers.’’. (c) EFFECTIVE DATE.—The amendments made by 17 this section shall take effect on the date of the enactment 18 of this Act. 19 Æ VerDate Sep 11 2014 05:00 Jun 12, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S1887.IS S1887 kjohnson on DSK79L0C42PROD with BILLS