Sponsors (3)
The bill protects remote workers from multi‑State income taxation and provides clarity for employers, at the cost of reduced state income tax revenue and added compliance burdens for businesses.
Nonresident telecommuters and other remote employees keep more of their pay because the bill limits States to taxing compensation only for periods the worker is physically present in the State, reducing multi‑State double taxation.
Employees and employers gain clearer rules and greater administrative certainty because the bill clarifies that working from home for convenience does not create State tax liability and prevents States from recharacterizing paid out‑of‑State work time without employer agreement, which also protects withholding and wage treatment consistency.
State governments (and residents relying on state-funded services) face reduced income tax revenue because the bill restricts taxation of nonresident compensation, which could force spending cuts or cause States to raise other taxes or fees.
Employers and payroll providers bear increased compliance burdens because they must track employees' physical locations more precisely and adjust withholding, creating administrative costs especially for small businesses.
Based on analysis of 2 sections of legislative text.
Limits State income taxation of nonresident workers to periods when the worker is physically present in the State and bans "convenience of the employer" presence tests.
Limits state income tax on pay earned by nonresident multi‑state workers and telecommuters by tying state taxing power to where the worker is physically present. States may tax a nonresident's compensation only for periods the worker is physically present in that State, and the bill forbids treating remote work done from another State as if the worker were present or as non‑work time to evade this rule. The law defines key terms (State; income tax; nonresident individual; employee; employer; compensation), prohibits a "convenience of the employer" test or similar constructions that would deem presence, and clarifies it does not affect non‑income taxes or tax treatment of entities and non‑employees. The rule takes effect on enactment.
Official title: 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.
Introduced August 24, 2026 by James A. Himes · Last progress August 24, 2026