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June 19, 2020

Senate introduces modified Mobile Worker Relief bill to protect workers temporarily working in states due to COVID-19

On June 18, 2020, US Senator John Thune (R-SD.), chairman of the Senate Finance Subcommittee on Taxation and IRS Oversight, issued a press release announcing that he and US Senator Sherrod Brown (D-OH) have introduced the Remote and Mobile Worker Relief Act (S. 3995).

The bill would expand on proposed provisions to reduce the financial and administrative burden of short-term business travel introduced last year under the Mobile Workforce State Income Tax Simplification Act (S.604), a measure that Senator Thune has been introducing since 2012, but has failed to pass in the House.

S. 3995 provides the same general protections as contained in S. 604, specifically, employees and employers would be relieved of nonresident income tax and withholding if employees are working in the nonresident state for less than 30 days in the calendar year.

Additionally, in response to the significant rise in telework due to the COVID-19 emergency, S. 3995 would, through December 31, 2020, prohibit the imposition of state income tax and withholding for employees temporarily working in a state due to COVID-19 for less than 90 days. S. 3995 also provides nexus relief for purposes of the imposition of state business taxes due solely to employees temporarily working in the state because of the COVID-19 emergency.

Key provisions of S. 3995 effective January 1, 2020

(a) Limitations on state withholding and taxation of employee income. No part of the wages or other remuneration earned by an employee who performs employment duties in more than one taxing jurisdiction shall be subject to income tax in any taxing jurisdiction other than —

  1. the taxing jurisdiction of the employee's residence; and
  2. the taxing jurisdiction within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.

(b) Special provisions for COVID-19.

  1. Income tax and withholding on employee wages. For calendar year 2020, in the case of any employee who performs employment duties in any taxing jurisdiction other than the taxing jurisdiction of the employee's residence during such year as a result of the COVID-19 public health emergency, the time specified in (a)(2) above would be changed from 30 days to 90 days.
  2. Nexus relief. In the case of an out-of-state business that has any employees working remotely within such jurisdiction during the covered period, the duties performed by such employees within such jurisdiction during such period shall not be sufficient to create any nexus or establish any minimum contacts or level of presence that would otherwise subject such business to any registration, taxation, or other related requirements for businesses operating within such jurisdiction.

    Except as provided under subsection (a)(2) above, with respect to any tax imposed by such taxing jurisdiction, which is determined, in whole or in part, based on net or gross receipts or income, for purposes of apportioning or sourcing such receipts or income, any duties performed by an employee of an out-of-state business while working remotely during the covered period shall be disregarded with respect to any filing requirements for such tax; and shall be apportioned and sourced to the tax jurisdiction that includes the primary work location of such employee.
  3. Nexus relief coverage period. The period of nexus relief in (b)(2) above begins on the date on which an employee began working remotely; and ending the earlier of:
  • The date on which the employer allows such employee to return their primary work location and not less than 90% of their permanent workforce returns to such work location or,
  • December 31, 2020.

Ernst & Young LLP insights

Whether this bill will become law is uncertain, given the historical opposition in the House to adversely affecting state income tax revenue streams.

Pursuant to relief specific to COVID-19, some states have provided relief from income tax and withholding and the assertion of nexus. Absent specific guidance to the contrary, employers must follow the state laws that apply, which generally means, nonresident income tax withholding is required on all wages earned in the nonresident state. This means that businesses with temporary teleworkers or employees working in more than one state need to continue to be vigilant in meeting their nonresident income tax withholding and information reporting requirements, keeping in mind that currently only 24 states waive their nonresident income tax requirements based on de minimis earnings and/or time spent in the state.

Enforcement of employer withholding and reporting obligations continues to be aggressive in some states.

For more information on state relief from income tax, income tax withholding and the assertion of nexus pursuant to COVID-19, see our state guide to COVID-19 payroll and employment tax provisions.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (
   • Debera Salam (
   • Kristie Lowery (
   • Peter Berard (


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