© 2020 American Payroll Institute, Inc. APA Supports Bill Addressing Nonresident Taxation During Pandemic Fcoronavirus or payroll professionals and tax authorities, the novel (COVID-19) pandemic has highlighted state lines as potential hazards for employees who cross them for work and for workers who would normally cross them but are prevented due to stay-at-home orders. Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio) introduced a bill that would help alleviate the hazards, with a special provision applicable to the current pandemic. S. 3995, the Remote and Mobile Worker Relief Act of 2020, would create a permanent, 30-day safe harbor against nonresident income taxation and expand that safe harbor to 90 days during the pandemic. The bill expands on the Mobile Workforce State Income Tax Simplification Act (S. 604, H.R. 4796), which the two senators have championed for years and APA has supported since it was first introduced in 2007. As with the mobile workforce bill, S. 3995 would not cover professional athletes or entertainers, qualified production employees, or certain public figures. Though S. 3995 does not mention health care professionals, the senators said the bill “would ensure that medical professionals from around the country who supported areas hard hit by the COVID-19 pandemic do not face unexpected or increased state income tax bills.” “The bill would also address potential problems remote workers are facing during the pandemic, including the possibility of having their state income taxes become out of balance because they worked from home in a different state than their ordinary place of employment during the pandemic,” the senators said. In this regard, S. 3995 expands on the protections of the mobile workforce bill by providing that, during the pandemic, workers who telecommute from out of state would be treated as though their wages were earned in the state of their primary work location. APA urged congressional leadership “to support this bill and see it pass in both the Senate and House of Representatives.” Due to the pandemic, “the need for this legislation has never been more urgent, for both workers and their employers,” APA said. APA recommends amendments In a separate letter to Sens. Thune and Brown, APA recommended two amendments to ensure it will sufficiently protect workers during the current pandemic and in the future. First, the 90-day emergency extension is insufficient and should be expanded to at least 180 days, APA said. Lockdowns beginning in mid-March will likely reach the 90-day threshold in mid-July, far sooner than the bill is likely to progress. While states are currently attempting to reopen, such efforts are uneven and unpredictable. Some APA members report that they do not expect to return to their offices until 2021. “APA would prefer to see a solution allowing employees and their employers to decide the safest course of action without undue pressure from tax authorities,” APA said. Second, APA recommended that S. 3995 not be limited to emergency relief for the COVID-19 pandemic but be positioned as a disaster preparedness tool. “We may not be able to predict what the next emergency will be but can expect another emergency that will cause workers to cross state lines in response and may also prevent workers from traveling to their normal work locations,” APA said. For many years, efforts to address nonresident income tax issues have stalled in the Senate. This year, APA has also focused on state efforts, supporting legislation in Kansas and Minnesota and also is encouraging all state tax administrators to provide relief for employees temporarily teleworking from out of state. Ultimately, APA believes a federal approach will ensure fair and consistent handling of multistate taxation and is preferable to a state-by-state approach. APA Requests Further Guidance on City of Eugene Payroll Tax Aadministrativetwo PA offered recommendations to improve the feasibility of the payroll tax and withholding requirements in the city of Eugene, Ore., in June, calling for the city to: (1) Adopt a withholding calculation that mirrors the calculation required by the IRS and (2) Base the employer tax rate on known facts rather than results that can change throughout a tax period. These recommendations follow APA comments submitted to Eugene in February in which APA asked for a delay in implementation. The city agreed to APA’s request, pushing the effective date from July 1, 2020, to January 1, 2021. The payroll tax will fund community services in Eugene. Employers with a physical address in the city will pay 0.0021 times gross payroll earned within the city. Employers with two or fewer employees will pay 0.0015 on the first $100,000 in wages. July 2020 A Supplement to Payroll Currently, Issue 7, Volume 28
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