Sponsors (3)
The bill shifts tax liability toward greater take‑home pay and legal certainty for remote workers and employers, but reduces state income tax revenue and creates compliance costs that may lead to higher other taxes or cuts in services.
Nonresident telecommuters (people who live in one State but work remotely for an employer in another) will generally keep more of their pay because States may tax compensation only for periods the worker is physically present in the State, reducing multi‑State double taxation.
Remote employees and their employers gain clearer rules and predictability because the bill clarifies that working from home for convenience cannot itself create a State tax liability.
Workers and small employers are protected from States recharacterizing paid work time in another State as non‑compensable without employer agreement, preserving consistent taxable‑wage treatment and withholding practices.
State governments will lose income tax revenue from nonresident compensation, reducing funds available for state services and programs.
To offset lost income tax revenue, States may raise other taxes or fees or cut services, which could shift costs onto residents or reduce public services.
Employers and payroll providers may face additional compliance costs and administrative burdens to track employees' physical locations and adjust withholding to follow the rule.
Based on analysis of 2 sections of legislative text.
Bars States from taxing nonresident workers' pay except for periods the worker is physically present in the taxing State and forbids "convenience of the employer" tests.
Prevents States from taxing wages of nonresident workers except for periods when the worker is physically present in that State, and bars States from treating remote work done from another State as taxable in the employer’s State. It also forbids using a "convenience of the employer" rule to recharacterize where compensation was earned and defines key terms such as "nonresident individual," "employer," and "compensation." 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