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US Senator John Thune (R-SD), ranking member 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 again introduced the Remote and Mobile Worker Relief Act (S. 1274). A similar measure was introduced in 2020 (S.3995) but it failed to pass before the end of the 116th legislative session (2019—2020).

In addition to temporary COVID-19 relief provisions, the bill includes provisions to reduce the financial and administrative burden of short-term business travel introduced in 2019 under the Mobile Workforce State Income Tax Simplification Act (S.604). Senator Thune has been introducing mobile workforce state income tax simplification legislation since 2012, but it has repeatedly failed to pass in the House.

Mobile workforce state income tax simplification

Effective January 1, 2020, no part of the wages or other remuneration earned by an employee who performs employment duties in more than one taxing jurisdiction will be subject to income tax in any taxing jurisdiction other than the taxing jurisdiction —

1. Of the employee's residence
2. 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

For calendar years 2020 and 2021 only, if any employee 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 period in #2, above, is 90 days rather than 30 days.

Note also that the term "employee" for these purposes does not include a professional athlete, professional entertainer, qualified production employee or certain public figures.

Special relief provisions for teleworkers in connection with the COVID-19 emergency

The following provisions would be effective January 1, 2020 and generally end December 31, 2021:

• State and local income tax and income tax withholding relief. With respect to any employee who is working remotely within a particular taxing jurisdiction during the covered period —
• Any wages the employee earns during the period would be deemed to have been earned at the employee's primary work location
• If an employer maintains a system that tracks where the employee performs duties on a daily basis, wages the employee earns may, at the election of the employer, be treated as earned at the location in which such duties were remotely performed
• Nexus relief. For an out-of-state business with employees working remotely within an applicable taxing jurisdiction, the duties those employees performed within the jurisdiction during the covered period would not be sufficient to create nexus or establish any minimum contacts or level of presence to subject the business to registration, taxation, or other related requirements for businesses operating within the jurisdiction.
• The period of nexus relief would begin on the date an employee began working remotely and end on the earlier of (1) the date the employer allows the employee to return their primary work location and not less than 90% of their permanent workforce returns to such work location or (2) 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/local income tax revenue streams.

Under tax measures specific to COVID-19, some states/localities have provided temporary relief from income tax, income tax withholding and the assertion of nexus. Employers should be aware that, absent specific guidance to the contrary, employers must follow the state/local laws that apply, which generally means that nonresident income tax withholding is required on all wages earned in the nonresident jurisdiction.

Accordingly, businesses with temporary teleworkers or employees working in more than one state must continue to be vigilant in meeting their nonresident income tax withholding and information reporting requirements, keeping in mind that currently only 26 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.

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