Sponsors (2)
The bill standardizes and clarifies multi-State withholding rules and protects taxpayers from retroactive liability—making payroll easier to administer and tax outcomes more predictable—while shifting revenue away from some States and creating new withholding timing, compliance, administrative, and privacy challenges for employers and certain workers.
Multi-state employees (commuters and residents who work across State lines) will generally avoid unexpected multi-State income tax bills because wages are taxable to the home State or only to nonresident States where the employee works more than 30 days, making take-home pay and year-end tax liabilities more predictable.
Taxpayers gain clear timing and retroactivity protections: the law sets a known January 1 effective date and excludes tax liabilities that accrued before that date, allowing taxpayers to plan and avoiding retroactive tax bills.
Employers get clearer withholding and payroll rules (including standardized definitions and an explicit day-count rule with transit-time exclusion), reducing withholding uncertainty and simplifying payroll administration.
States that previously taxed many nonresident workers could lose income tax revenue, creating fiscal pressure that may shift tax burdens or reduce funding for state services.
Employees who perform more than 30 days of work in a nonresident State may face withholding in that State beginning on their first day there, causing short-term take-home-pay volatility for some workers.
Different States may define 'wages or other remuneration' differently, leaving residual ambiguity and creating compliance complexity and potential double-tax risk for multi-State employers and workers.
Based on analysis of 3 sections of legislative text.
Limits nonresident State income tax to situations where an employee works there more than 30 days per year and bars withholding/reporting unless that threshold is met, with defined counting rules and exclusions.
Introduced April 10, 2025 by John Thune · Last progress April 10, 2025
Creates a national rule limiting when states may tax wages of employees who work in more than one state: a nonresident state may tax an employee only if the employee is physically present and working in that state for more than 30 days in the calendar year. Employers may only withhold or report to a state that can tax the employee under this rule, may rely on an employee’s annual estimate of days for withholding except where they have actual knowledge of fraud (and must use employer time-and-attendance records if maintained), and must follow defined rules for how to count a ‘‘day’’ and which workers are excluded. The law takes effect January 1 of the second calendar year after enactment and does not apply to tax obligations that accrue before that date.