The Mobile Workforce Bill: Addressing “Road Warrior” Compliance

By Jamie Yesnowitz, J.D., LL.M.

The Mobile Workforce State Income Tax Simplification Act (Mobile Workforce Bill) is a congressional effort to set uniform standards on the states’ taxation of nonresident employee income and employer withholding on such income. 1 The centerpiece of the Mobile Workforce Bill is a provision under which states generally could tax a nonresident employee’s income only if the employee is present and performing employment duties in the state for more than 30 days during the calendar year. Likewise, the bill would require employers to withhold state taxes on that income only after the 30-day threshold has been met and to catch up all required withholding at that time.

The Mobile Workforce Bill passed the House of Representatives this spring, and it is under consideration in the Senate. This column addresses the historic treatment of nonresident employee income, the variety of state efforts in this area, and the provisions of the Mobile Workforce Bill.


In an increasingly mobile environment, employees are traveling for business more frequently than in the past. Thus, a significant class of employees has emerged that has been characterized by a descriptive term: the “road warriors.” A road warrior travels across state lines several days a week to visit external clients or internal colleagues from other offices, attend meetings and conferences, and otherwise transact business. The lifestyle, while ideal for cultivating business relationships and accumulating frequent flyer miles and credit card rewards points, can be very demanding and stressful. The road warrior often wakes up in the morning not exactly sure which state he or she is in, or which state he or she is expected to be in by the end of the day.

Given the lifestyle, many road warriors are blissfully unaware that for personal income tax purposes, there generally are two ways in which a state may claim the right to tax an employee’s earned income. The employee’s state of residence universally has the right to tax all of the employee’s income. However, the states in which the employee earns income also have the right to tax the income earned within their borders. Adding to the complexity is that, as discussed in further detail below, states do not always exercise the right to tax the nonresident employee or require the employer to withhold income tax on the nonresident in such circumstances—and if they do, they vary as to when and how they do it.

Some states impose tax and withholding requirements on the first day the nonresident employee works in the state. Other states impose nonresident tax and withholding requirements after the employee earns a certain amount of income, or after the employee has been working in the state for a number of days. Still other states have entered into reciprocal agreements under which a state will not tax a nonresident on income earned in that state if the nonresident is a resident of another specified state. Likewise, under a reciprocal agreement, the employer is not required to withhold from the nonresident employee’s earnings.

Given these multistate complexities, it is not surprising that employees (particularly road warriors) and their employers do not always know or follow these rules. Compliance can be difficult from the perspective of the employee, as a road warrior working just a couple of days in each of 20 states over the course of a year may be required to file 20 nonresident personal income tax returns in addition to a resident personal income tax return.

Many nonresident filings likely report only a very small amount of tax in these jurisdictions. Spending several hours to complete and file a number of tax returns that in the aggregate may show only a couple of hundred dollars in state income tax, while figuring out how to claim a state tax credit in the home state to avoid double taxation, is something the road warrior wants to avoid. Likewise, the road warrior does not necessarily want to have to pay a tax preparer a substantial amount of money to make sure these near-zero tax filings are made. Therefore, as a practical matter, most road warriors do not file the nonresident returns or have income withheld in these states unless they are forced to do so by their employers.

From the employer’s perspective, complying with withholding requirements can be practically impossible if employees do not properly disclose where they are performing work for the employer. Even if the employer can track the precise locations of all of its employees, the employer’s payroll system may not be able to account for all of the intricacies of nonresident withholding. As a result, the employer’s payroll system may require “day-one” withholding in all nonresident states to protect the employer from potential penalties for failure to withhold the nonresident personal income tax, even though a threshold level of activity may be required to subject a nonresident to such tax. This results in filing unnecessary nonresident state tax returns solely to retrieve excess state tax withholding.

State Efforts to Resolve the Problem

States have tried to address road warrior compliance in several ways, and while these efforts are laudable in their pursuit of simplicity, they have not resulted in a workable national solution. Approximately one-third of the states (mostly bordering each other in the Midwest and East) have entered into reciprocity agreements under which one border state agrees not to subject to tax another border state’s individuals under any circumstances, and vice versa. Accordingly, the in-state resident does not need to file a nonresident border state return, and the employer does not have to withhold nonresident income taxes with respect to the in-state resident, even if the in-state resident primarily works in the nonresident state.

For example, a Maryland resident who travels daily to Virginia for work should be subject to tax only in Maryland because of the reciprocity agreement between these bordering states. To ensure that the Maryland resident is not subject to withholding in Virginia, the Maryland resident must file an exemption form with the employer. 2 Unfortunately, the collaboration between border states provides only patchwork relief, and it is primarily geared toward nonresident employees who ordinarily commute a few miles a day to an adjoining state in which their employer is located. The rules normally do not apply to the road warrior who regularly travels greater distances.

Some states have adopted specific thresholds under which a nonresident tax withholding obligation is not imposed on an employer unless the employee works more than a certain number of days or earns more than a certain amount of income in the nonresident state. For example, Arizona does not require withholding on nonresident individuals who are physically present in the state for less than 60 days for the purpose of performing a service that will benefit the employer or a related entity. 3 Wisconsin does not require withholding on nonresident individuals for services performed in Wisconsin if the employer reasonably estimates that during that calendar year the employee will earn less than $1,500 in Wisconsin. 4

Note, however, that these rules only cover exemptions from withholding; they do not necessarily address the nonresident taxpayer’s potential filing requirement and tax liability in the state. Furthermore, only a minority of states use such day or income thresholds—and without any uniform standard.

The Model Mobile Workforce Statute: Finally, the states, through the efforts of the Multistate Tax Commission (MTC), have developed a potential option for a broad-based system that covers the treatment of all nonresidents. The MTC drafted a model statute, the Model Mobile Workforce Statute, designed to promote consistent employer withholding thresholds, along with an exclusion for an employee’s personal income tax obligation. 5

So far, only North Dakota has passed state-specific mobile workforce legislation substantially in line with the MTC model, which is effective for tax years beginning after Dec. 31, 2012. 6 Under this statute, an employer is not required to withhold North Dakota income tax on a nonresident’s wages if (1) the individual works for no more than 20 days in North Dakota; (2) the individual’s state of residence provides a substantially similar exemption for North Dakota residents or does not impose an income tax; and (3) the nonresident has no other income from sources within North Dakota. 7 Likewise, a nonresident employee who works no more than 20 days in North Dakota is not required to file and pay tax on that income to North Dakota if the nonresident has no other income from sources within North Dakota. 8 Withholding and filing obligations remain for certain types of employees, including employees paid on a per-event basis, athletes, and entertainers. 9 As the North Dakota statute applies only to employees located in non–income tax states or states that offer the same type of relief, this approach is unlikely to provide large-scale relief any time soon. 10

The Mobile Workforce Bill: The Congressional Solution

In light of these largely incomplete efforts, over the past several years Congress has considered the Mobile Workforce Bill as a multistate solution. The bill, which has been introduced in the last three congressional terms, 11 limits the taxation of wages and remuneration earned by a nonresident employee to (1) the state of the employee’s residence and (2) the state in which the employee is physically present performing duties for more than 30 days during the calendar year. 12 The bill also allows states to require employers to retroactively withhold on all wages or other remuneration earned as of the first day the employee began performing work in the state once the 30-day threshold has passed. 13

One provision in the bill that has received a great deal of attention is the definition of a “day.” Currently, in certain instances, the lack of uniformity among states regarding nonresident employee withholding can effectively lead to double taxation. For example, an employer can be required to withhold income tax in two states for the same days of work because any part of a day spent working in each state may count as a working day. 14 While in many cases a credit on the employee’s resident income tax return can ensure that the employee ultimately is taxed by only one jurisdiction, the employee may need to wait until the next calendar year to actually receive the benefit from the credit and must diligently keep track of days he or she works in two states. Further, in many instances, an employee residing in a state with no income tax (including Florida and Texas) works in states that impose income taxes. In this scenario, the employee does not receive a credit from the resident state for nonresident taxes paid.

In the Mobile Workforce Bill, the definition of a “day” is designed to take into account the fact that a road warrior may be in multiple states in a day and that, to prevent double taxation, no more than one state should lay claim to the nonresident in each day. Accordingly, under the bill, an employee is considered present and performing employment duties within a state for a day if the employee performs the preponderance of his or her duties within such state for such day. 15 Where an employee is present and performs material employment duties in both the resident state and one nonresident state on the same day, the employee will be considered to have performed the preponderance of his or her duties for that day in the nonresident state. 16

To prevent the road warrior from having to look out the window of an aircraft to determine which state he or she is flying over, the bill states that the portion of a day that an employee spends in a state while in transit is not considered in determining where he or she performed employment duties. 17 Presumably, the state in which a road warrior is in an airplane terminal on a short layover between flights could not lay claim to the nonresident, even if he or she sends business emails and performs other work functions in the terminal.

The bill also addresses an employer’s tracking of an employee’s location when performing work duties. For the purpose of determining withholding- and reporting-related penalties, employers may rely on employees’ annual determination of time they expect to spend in each nonresident state, unless the employer has actual knowledge that the employee made the determination fraudulently or the employer and employee collude to evade tax. 18 If, in the regular course of business, an employer maintains records of an employee’s location, those records do not prevent the employer from relying on the employee’s determination of the time he or she expects to spend in the nonresident state. 19 However, if an employer, at its discretion, maintains a time and attendance system tracking where an employee performs his or her services each day, the data from such a system will be used instead of the employee’s determination. 20

Exclusions: As in the North Dakota statute, certain employees are excluded from the uniform rules provided in the bill, including athletes, professional entertainers, and certain public figures who give speeches or make similar types of appearances and are paid per event. 21 Generally, these road warriors repeatedly earn significant amounts of money in each of the places where they work. Accordingly, they (and their employers) may be better able than those in more-ordinary occupations to deal with the filing and withholding requirements for nonresident income. In addition, the revenue loss from not allowing nonresident states to tax this type of income could be significant.

What the bill does not do: The Mobile Workforce Bill does not address taxes and withholding requirements imposed by localities. For example, Philadelphia imposes a nonresident tax on wages of employees entering the city for business. 22 For purposes of this municipal tax, the bill would not impose a 30-day threshold for income earned within the city. Therefore, a nonresident who works in Philadelphia for no more than 30 days would not be required to file a nonresident Pennsylvania income tax return, but he or she would still have to file a Philadelphia Wage Tax return and would be subject to withholding for that Philadelphia tax. Likewise, the bill does not change the rule with respect to income distributed to a partner from a partnership. A partner in a law firm that is doing business in multiple states normally would still have to file personal income tax returns in the states in which the partnership generated the income, even if the partner was never physically present in those states, unless the partner elected to file a composite nonresident return.

The bill is currently silent as to the exact procedure when the employee working in a nonresident state passes the 30-day threshold during the year. While the employer has an obligation to withhold nonresident income tax for the entire work period on an employee passing the 30-day threshold, it is uncertain whether the employer must immediately withhold all 31 days of nonresident income tax on the employee or risk incurring penalties. Requiring an immediate withholding of this amount could significantly affect the employee financially. Such a “cliff” could cause employers and their employees to change work arrangements toward the end of a year to avoid crossing the 30-day threshold.

Finally, the Mobile Workforce Bill would not disturb existing reciprocity agreements between states, which would still be free to fully exempt nonresidents from taxation. Likewise, current state-specific exemptions that fully comply with the rules in the bill would not be disturbed.

Effective date: The bill would take effect on Jan. 1 of the second year beginning after the date of enactment. 23 Accordingly, if the bill is enacted before the end of 2012, the effective date will be Jan. 1, 2014.

Status of the Mobile Workforce Bill

The Mobile Workforce Bill passed the House on a bipartisan basis by voice vote on May 15, 2012. 24 The companion Senate bill was introduced in that chamber by Sen. Sherrod Brown, D-Ohio, on Aug. 2, 2012. It is co-sponsored by Sen. Kay Bailey Hutchison, R-Texas, and was referred to the Senate Finance Committee. Proponents include the AICPA, which has testified in Congress and submitted letters in support of the bill. They argue that the bill promotes consistent employer withholding thresholds and exclusion thresholds for employees’ personal income tax obligations, increases overall compliance, and mitigates the burden on nonresident employees who temporarily perform work in several states. (AICPA resources related to the bill are available online.) Further, the bill aspires to balance the states’ legitimate interest in raising revenue against burdens imposed on multistate employers and employees.

What is preventing the bill’s enactment if it passed the House with bipartisan support and has bipartisan co-sponsors in the Senate? Three obstacles appear to be inhibiting passage. The first is the lack of time remaining in the current Congress. This year, as in most election years, very few legislative bills were adopted in the weeks just before the election, and it is uncertain whether the Senate will be able to dedicate time and effort to the bill in a lame-duck session at the end of the year. The environment in the Senate, which has been acrimonious at times, makes it difficult for any legislation to pass, much less state-specific tax legislation.

Second, New York’s senators (Democrats Charles Schumer and Kirsten Gillibrand) are generally opposed to the bill because of its perceived adverse effect on the state’s revenues. Because New York City is a financial and business center and adjoins New Jersey and Connecticut suburbs, many nonresident employees work there occasionally or regularly.

Finally, state governments and tax authorities often oppose tax bills that impose a federal solution to a state problem. This aversion to federal action on state taxation stems from the thought that in enacting such a measure, Congress is treading into territory reserved for the states, especially when it reduces state revenues.

Despite these obstacles, the fact that the Mobile Workforce Bill has passed the House (following two terms of Congress in which the bill did not move) increases the probability that legislation in this area will be enacted soon. Congressional action would provide relief to the road warriors and their employers throughout the United States.



1 H.R. 1864 (passed by voice vote May 15, 2012); S. 3485.

2 Accordingly, the Maryland resident would be required to file Form VA-4 (the Virginia exemption form) with the employer to confirm operation of the reciprocity agreement. Other states have similar exemption forms.

3 Ariz. Rev. Stat. §43-403.A.5(b). Days spent in transit, engaging in personal activities, participating in training or professional development activities, or attending meetings not directly connected to the Arizona operations of the employer or related entity are not counted toward the 60-day threshold (Ariz. Rev. Stat. §43-403.A.5(b)(i)–(iii)).

4 Wis. Stat. §71.64(6)(b).

5 Multistate Tax Commission, “Model Mobile Workforce Statute” (July 27, 2011).

6 S.B. 2170, reenacting and amending N.D. Cent. Code §57-38-59.3.

7 N.D. Cent. Code §57-38-59.3.3.

8 N.D. Cent. Code §57-38-59.3.1.a.

9 N.D. Cent. Code §57-38-59.3.1.b.

10 Particularly as relatively few employees travel to North Dakota.

11 Prior to 2011, the bill was introduced by Rep. Hank Johnson, D-Ga., as H.R. 2110 on April 27, 2009, and H.R. 3359 on Aug. 3, 2007.

12 S. 3485, §2(a).

13 S. 3485, §2(b).

14 For example, any portion of a day spent working in New York counts as a full day, except for days spent in New York for the sole purpose of job-related training (N.Y. Dep’t of Tax. and Fin., TSB-M-12(5)I (5/5/12). Likewise, any portion of a day spent performing services in Connecticut counts as a full day (Conn. Dep’t of Rev. Servs., AN 2010(3) (1/11/10)).

15 S. 3485, §2(d)(1)(A).

16 S. 3485, §2(d)(1)(B).

17 S. 3485, §2(d)(1)(C).

18 S. 3485, §2(c)(1).

19 S. 3485, §2(c)(2).

20 S. 3485, §2(c)(3).

21 S. 3485, §§2(d)(2)–(5).

22 Phila. Code §19-1502(1)(b).

23 S. 3485, §3.

24 Integral to the passage of the Mobile Workforce Bill by the House of Representatives was the submission of testimony by the AICPA and the Council on State Taxation (COST) before the Committee on the Judiciary (Subcommittee on Courts, Commercial and Administrative Law) on May 25, 2011. The AICPA testimony for the May 25, 2011, hearing is available here, and AICPA testimony for a Nov. 1, 2007, hearing is available here. The May 25, 2011, COST testimony, which contains a compendium of state-by-state withholding rules, is available here.



Jamie Yesnowitz is a principal with Grant Thornton LLP in Washington, D.C., and is the firm’s State and Local Tax—National Tax Office practice leader. Mr. Yesnowitz also is chair of the AICPA State & Local Tax Technical Resource Panel. For more information about this column, contact Mr. Yesnowitz at


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