To amend title 4 of the United States Code to prohibit the double taxation of telecommuters and others who work at home.

May 23, 2005

Mr. SHAYS (for himself, Ms. DELAURO, and Mr. TOM DAVIS of Virginia) introduced the following bill; which was referred to the Committee on the Judiciary

To amend title 4 of the United States Code to prohibit the double taxation of telecommuters and others who work at home.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Telecommuter Tax Fairness Act of 2005'.

SEC. 2. PROHIBITION ON DOUBLE TAXATION OF TELECOMMUTERS.

(a) In General- Chapter 4 of title 4, United States Code, is amended by adding at the end the following new section:

`Sec. 127. Prohibition on double taxation of telecommuters and others who work at home

`(a) Physical Presence Required-

`(1) IN GENERAL- In applying its income tax laws to the salary of a nonresident individual, a State may only deem such nonresident individual to be present in or working in such State for any period of time if such nonresident individual is physically present in such State for such period and such State may not impose nonresident income taxes on such salary with respect to any period of time when such nonresident individual is physically present in another State.

`(2) DETERMINATION OF PHYSICAL PRESENCE- For purposes of determining physical presence, no State may deem a nonresident individual to be present in or working in such State on the grounds that such nonresident individual is present at or working at home for the nonresident individual's convenience.

`(b) Definitions- As used in this section--

`(1) STATE- The term `State' includes any political subdivision of a State, the District of Columbia, and the possessions of the United States.

`(2) INCOME TAX- The term `income tax' has the meaning given such term by section 110(c).

`(3) INCOME TAX LAWS- The term `income tax laws' includes any statutes, regulations, administrative practices, administrative interpretations, and judicial decisions.

`(4) NONRESIDENT INDIVIDUAL- The term `nonresident individual' means an individual who is not a resident of the State applying its income tax laws to such individual.

`(5) SALARY- The term `salary' means the compensation, wages, or other remuneration earned by an individual for personal services performed as an employee or as an independent contractor.

`(c) No Inference- Nothing in this section shall be construed as bearing on--

`(1) any tax laws other than income tax laws,

`(2) the taxation of corporations, partnerships, trusts, estates, limited liability companies, or other entities, organizations, or persons other than nonresident individuals in their capacities as employees or independent contractors,

`(3) the taxation of individuals in their capacities as shareholders, partners, trust and estate beneficiaries, members or managers of limited liability companies, or in any similar capacities, and

`(4) the income taxation of dividends, interest, annuities, rents, royalties, or other forms of unearned income.'.

(b) Clerical Amendment- The table of sections of such chapter 4 is amended by adding at the end the following new item:

`127. Prohibition on double taxation of telecommuters and others who work at home.'.

(c) Effective Date- The amendments made by this section shall take effect on the date of enactment of this Act.

END