Federal Elections May Tip Balance in Favor of State Tax Laws

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By Jennifer McLoughlin

Dec. 12 — The 2017 political landscape may set the stage for Congress to take long-awaited action on several bills impacting taxes at the state and local level.

A number of bills, or earlier iterations, have been long-pending before federal lawmakers. Some include:

  •  Mobile Workforce State Income Tax Simplification Act (Mobile Workforce)
  •  Business Activity Tax Simplification Act
  •  Digital Goods and Services Tax Fairness Act
  •  Several remote sales tax proposals, including the Marketplace Fairness Act and Remote Transactions Parity Act. The No Regulation Without Representation Act was introduced in July, followed by an updated discussion draft of the Online Sales Simplification Act in August.
While all have stalled at various stages—even when Republicans were the majority in both congressional chambers—the November elections may have provided an opening for some of the measures.

“It’s a totally new world,” Arthur Rosen, a partner with McDermott Will & Emery LLP, said during a Dec. 9 panel at the New York University Institute on State and Local Taxation. “Everything has changed. Everything you knew before about how politics works, what’s going to happen to Washington, is not necessarily valid anymore.”

Rosen said many congressional members and staff prefer to handle all or some of the bills together, so that a combination of bills “is not unlikely” in 2017.

Waiting for Mobile Workforce

The House passed the Mobile Workforce bill (H.R. 2315) by voice vote Sept. 21, but the Senate didn’t take action on the bill this session. A companion piece to the House legislation, S. 386, has been in the Senate Finance Committee.

Under the bill, states can’t assess income tax liability on nonresidents conducting business in the state for 30 or fewer days each year. Likewise, states would be prohibited from requiring employers to withhold the same. The bill carves out the earnings of professional athletes, professional entertainers and certain public figures compensated on a per-event basis.

“As a stand-alone bill, virtually everybody supports the concepts behind Mobile Workforce,” Rosen said. However, he explained that politics have largely obstructed the bill from becoming law—including “wheeling and dealing” that accompanies lawmaking and resistance from lawmakers. New York, in particular, has voiced opposition over the bill’s impact on state revenue.

While businesses wait for Congress to take action, they aren’t without a defense in certain circumstances. Rosen explained that protections are available under the federal due process and commerce clauses—and companies can seek guidance or assurances from state officials.

To contact the reporter on this story: Jennifer McLoughlin in Washington at jmcloughlin@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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