Multi-State Worker Tax Fairness Act of 2021
Bill: H.R.4267 | Sponsor: Rep. Himes, James A. (D-CT)
Policy area: Taxation

Summary:
Multi-State Worker Tax Fairness Act of 2021
This bill limits the authority of a state to impose its income tax on the compensation of a nonresident individual to the period in which the nonresident individual is physically present in the state.

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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Multi-State Worker Tax Fairness Act 
of 2021''.

SEC. 2. LIMITATION ON STATE TAXATION OF COMPENSATION EARNED BY 
              NONRESIDENT TELECOMMUTERS AND OTHER MULTI-STATE WORKERS.

    (a) In General.--Chapter 4 of title 4, United States Code, is 
amended by adding at the end the following:
``Sec. 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' means each of the several 
        States (or any subdivision thereof), the District of Columbia, 
        and any territory or possession of the United States.
            ``(2) Income tax.--The term `income tax' has the meaning 
        given such term by section 110(c).
            ``(3) Income tax laws.--The term `income tax laws' includes 
        any statutes, regulations, administrative practices, 
        administrative interpretations, and judicial decisions.
            ``(4) Nonresident individual.--The term `nonresident 
        individual' means an individual who is not a resident of the 
        State applying its income tax laws to such individual.
            ``(5) Employee.--The term `employee' means an employee as 
        defined by the State in which the nonresident individual is 
        physically present and performing personal services for 
        compensation.
            ``(6) Employer.--The term `employer' means the person 
        having control of the payment of an individual's compensation.
            ``(7) Compensation.--The term `compensation' means the 
        salary, wages, or other remuneration earned by an individual 
        for personal services performed as an employee or as an 
        independent contractor.
    ``(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 such chapter 4 is 
amended by adding at the end the following new item:

``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.
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