HR-10142-119
Referred to the House Committee on the Judiciary.
Sponsored by James Himes (D-CT)
What it does
This bill would amend federal law to stop states from taxing the income of nonresident workers unless those workers are physically present in the state. It specifically bars states from using "convenience of the employer" rules, which currently let some states tax remote workers based on where their employer's office is located rather than where the employee actually works.
Who benefits
Remote and hybrid workers who live in one state but whose employer is based in another, particularly commuters in the New York-New Jersey-Connecticut and similar metro areas who currently face taxation by the employer's state despite working from home. Employers with multi-state workforces would face simpler withholding rules.
Who is hurt
States that currently rely on convenience-of-the-employer rules to tax nonresident telecommuters, primarily New York, Nebraska, Delaware, Pennsylvania, and Arkansas, which would lose tax revenue collected from out-of-state remote workers. State budgets and programs funded by that revenue, and possibly residents of states like New Jersey and Connecticut who currently receive tax credits offsetting double taxation, which may need adjustment.
Supporters argue
Supporters argue that taxing someone based on where their employer's office sits, rather than where they physically perform work, is unfair double taxation that disproportionately burdens remote workers who never set foot in the taxing state. They contend the rise of telework since 2020 has made convenience-of-the-employer rules increasingly outdated and that federal action is needed because states have been unwilling to reform these rules unilaterally, citing ongoing disputes between neighboring states over tax revenue from the same workers.
Opponents argue
Opponents argue that this bill would strip states of longstanding authority to structure their own tax systems and could significantly reduce revenue for states like New York that have relied on convenience rules for decades to fund public services. They contend Congress is overriding state sovereignty in an area traditionally left to states, and that the sudden revenue loss could force affected states to raise taxes elsewhere or cut services to compensate.