Mobile Workforce State Income Tax Simplification Act of 2025
Mobile Workforce State Income Tax Simplification Act of 2025 would change which states can tax wages earned by employees who work in more than one state. Sponsored by Senators Thune and Cortez Masto, the bill would limit state taxation of such income to only the employee’s home state and, if the employee spends more than 30 days in another state performing work, that nonresident state as well. In practice, this could reduce or eliminate the likelihood that many states (other than residence and the one where 30+ days occur) could tax an individual’s wages. The bill also sets rules for how employers determine where wages are earned and how withholding should work, including when an employer can rely on an employee’s self-estimate versus a time-tracking system. The act would take effect on January 1 of the second calendar year after enactment and would not apply to obligations that accrue before that date. Notably, the act excludes several categories of workers (professional athletes, professional entertainers, qualified production employees, and certain public figures) from its employee definition, and it uses the term “State” to mean the 50 states (DC is not included). In short, the bill aims to reduce multi-state tax complexity for mobile workers by limiting which states may tax wages and by providing a clearer framework for how and when states may withhold taxes from those wages.
Key Points
- 1Limit on where wages can be taxed: For employees who work in more than one state, only the employee’s home state and, if the employee spends more than 30 days in another state performing duties in that year, that other state may tax the wages. Other states cannot tax those wages.
- 2Withholding and reporting rules: Wages are not subject to state income tax withholding unless the state qualifies under the above rule. Withholding by the nonresident state starts when the employee begins duties in that state during the year.
- 3Employer determination rules: Employers may rely on an employee’s annual plan of how much time will be spent in each state, but not if the employer knows there is fraud or collusion to evade taxes. If an employer maintains regular records of an employee’s location, those records generally do not prevent relying on the employee’s determination, except if the employer uses a time-and-attendance system that tracks location daily, which would then govern allocations.
- 4Definitions and carve-outs: The bill defines “day” and “employee” with specific rules, and expressly excludes certain workers (professional athletes, professional entertainers, qualified production employees, and certain public figures) from the student-like “employee” definition for purposes of the act. It also defines terms like “time and attendance system” and clarifies that “State” means any of the 50 states (not including D.C.).
- 5Effective date and transitional rules: The act takes effect on January 1 of the second calendar year after enactment and does not apply to tax obligations that accrue before that date. It also allows for the possibility that wages may be limited by the state in which work is performed.