Multi-State Worker Tax Fairness Act of 2016

To amend title 4 of the United States Code to limit the extent to which States may tax the compensation earned by nonresident telecommuters and other multi-State workers. 1. Short title This Act may be cited as the Multi-State Worker Tax Fairness Act of 2016 2. Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers (a) In general Chapter 4 127. Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers (a) In general In applying its income tax laws to the compensation of a nonresident individual, a State may deem such nonresident individual to be present in or working in such State for any period of time only if such nonresident individual is physically present in such State for such period and such State may not impose nonresident income taxes on such compensation with respect to any period of time when such nonresident individual is physically present in another State. (b) Determination of physical presence For purposes of determining physical presence, no State may deem a nonresident individual to be present in or working in such State on the grounds that— (1) such nonresident individual is present at or working at home for convenience, or (2) such nonresident individual’s work at home or office at home fails any convenience of the employer test or any similar test. (c) Determination of periods of time with respect to which compensation is paid For purposes of determining the periods of time with respect to which compensation is paid, no State may deem a period of time during which a nonresident individual is physically present in another State and performing certain tasks in such other State to be— (1) time that is not normal work time unless such individual’s employer deems such period to be time that is not normal work time, (2) nonworking time unless such individual’s employer deems such period to be nonworking time, or (3) time with respect to which no compensation is paid unless such individual’s employer deems such period to be time with respect to which no compensation is paid. (d) Definitions As used in this section— (1) State The term State (2) Income tax The term income tax (3) Income tax laws The term income tax laws (4) Nonresident individual The term nonresident individual (5) Employee The term employee (6) Employer The term employer (7) Compensation The term compensation (e) No inference Nothing in this section shall be construed as bearing on— (1) any tax laws other than income tax laws, (2) the taxation of corporations, partnerships, trusts, estates, limited liability companies, or other entities, organizations, or persons other than nonresident individuals in their capacities as employees or independent contractors, (3) the taxation of individuals in their capacities as shareholders, partners, trust and estate beneficiaries, members or managers of limited liability companies, or in any similar capacities, and (4) the income taxation of dividends, interest, annuities, rents, royalties, or other forms of unearned income. . (b) Clerical amendment The table of sections of chapter 4 127. Limitation on State taxation of compensation earned by nonresident telecommuters and other multi-State workers. . (c) Effective date The amendments made by this section shall take effect on the date of the enactment of this Act.

Summary: Multi-State Worker Tax Fairness Act of 2016 This bill prohibits a state from imposing an income tax on the compensation of a nonresident individual for any period in which such individual is not physically present in or working in such state or from deeming such nonresident individual to be present in or working in such state on the grounds that: (1) such individual is present at or working at home for convenience, or (2) such individual's work at home fails any convenience of the employer test or any similar test.