24 June 2019 Illinois bill would ease income tax burden for some nonresidents The Illinois legislature has recently passed IL SB 1515, which would reduce the income tax burden for certain nonresidents by providing that nonresident employees are subject to the state's income tax only if they spend more than 30 days within the state in the calendar year. To support the new de minimis exception, the bill also requires employers to maintain reasonable records of working days nonemployees spend within the state. Under current law, Illinois income tax applies to all wages paid to Illinois nonresident employees for services provided within the state. The provision would apply to taxable years ending on or after December 31, 2020. Governor Pritzker is expected to sign the legislation and has 60 days to do so. Currently, only 23 states specifically exempt from nonresident income tax wages paid to employees who are present in the state to perform occasional duties that are incidental to the employee's out-of-state job duties. The de minimis threshold at which state nonresident income tax withholding applies may be based on income derived while working in the state during the year (e.g., for Idaho, less than $1,000 in a calendar year), or the number of days present in the state, or a combination of both. The "days threshold" ranges from 12 (e.g., Maine) to 60 (e.g., Hawaii). Outside of these 23 states, and with limited exceptions, all covered wages derived from employment in a nonresident state are generally subject to the state's personal income tax and withholding requirements. Since 2012, the US Congress has attempted to pass legislation to simplify and streamline state nonresident income tax. This year, Senators John Thune (R-SD) and Sherrod Brown (D-OH) reintroduced the Mobile Workforce State Income Tax Simplification bill (S.604). Under the federal bill, nonresident income tax would be simplified and streamlined for individuals and employers by prohibiting states from imposing income tax on individuals who work within a nonresident state for 30 or fewer days in the calendar year. For applicable nonresident employees, employers would be relieved of withholding nonresident income tax and meeting any related information reporting requirements. Recordkeeping would also be simplified by releasing employers from withholding or reporting penalties if they rely on an employee's annual determination of time to be spent working in the nonresident state (assuming there is no fraud or collusion). The Illinois adoption of the 30-day de minimis exception from the nonresident income tax withholding requirement would place the state in conformity with model legislation that many US lawmakers would like to incorporate into federal law.
Document ID: 2019-1154 | |||||||
