July 30, 2020 Senate-proposed HEALS Act contains income tax relief for teleworkers and short-term business travelers Senate Republicans on July 27, 2020, released a series of bills comprising their Health, Economic Assistance, Liability Protection and Schools (HEALS) Act proposal for the next coronavirus bill, including health, tax and liability protection components. Included in the HEALS Act proposal are provisions contained in the Remote and Mobile Worker Relief Act (S. 3995) introduced earlier this year by Senator John Thune (R-SD), chairman of the Senate Finance Subcommittee on Taxation and IRS Oversight, and Senator Sherrod Brown (D-OH). (See EY Tax Alert 2020-1619.) Like S. 3995, the proposed HEALS Act 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 advocating since 2009 but has failed to pass in the Senate. The proposed HEALS Act 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. Unlike S. 604, these provisions would expire after December 31, 2024. Additionally, in response to the significant rise in telework due to the COVID-19 emergency, the proposed HEALS Act 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. The proposal 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. Ernst & Young insights The Senate HEALS Act proposal is intended to be a counteroffer to the $3-trillion House-passed HEROES Act and will allow bipartisan negotiations to begin in earnest, with lawmakers facing a July 31 expiration of expanded unemployment benefits. Negotiations with the House are virtually certain to result in changes to the Senate's proposal and historically, the Senate has not supported bills that would have the impact of reducing states' personal income tax revenues. Nonetheless, including provisions to offer income tax relief to short-term business travelers and to teleworkers in connection with COVID-19 in the proposed HEALS Act gives them another opportunity for adoption. ———————————————
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