Uniform nonresident state income tax, withholding rules get AICPA support

Whether you’re a digital nomad or someone who’s worked outside your home state for just one day, you might be aware that states can tax income that out-of-state workers earn within their borders.

A Senate bill to limit the ability for states and localities to tax transient out-of-state employees, which the AICPA described as “critically important,” was filed Thursday by Senate Majority Leader John Thune, R-S.D., and Sen. Catherine Cortez Masto, D-Nev.

The Mobile Workforce State Income Tax Simplification Act of 2025, S. 1443, says that employees working outside their home state must work in a state for more than 30 days during the calendar year before it can impose state and local income taxes and withholding requirements. The bill was drafted “to help ensure that an equitable tax is paid to the state and local jurisdiction where the work is being performed,” the senators said in a news release.

Employees and employers now must deal with different state income tax payment, withholding, and reporting requirements in almost every state that vary based on length of stay, income earned, or both. The bill excludes professional athletes, professional entertainers, certain film workers, and certain public figures from the 30-day standard.

“This bill is critically important to CPA firms and many of their business clients,” the AICPA wrote Friday in a letter to Thune and Cortez Masto. “Thousands of CPA firms have employees who periodically work in states other than their home state. CPAs employed by companies with multistate operations are similarly affected. Because of the myriad of state income tax withholding laws, and varying de minimis exceptions, compliance is extremely difficult and time-consuming.”

For over a decade, the AICPA has advocated for mobile workforce legislation that would ease nonresident state income tax withholding and compliance burdens for taxpayers and businesses across the country.

The U.S. Chamber of Commerce, the Council on State Taxation, and the Mobile Workforce Coalition also support the bill, according to the Senate news release.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.