Today we're fortunate to have Chuck Wilsker, President and CEO of The Telework Coalition, and Nicole Belson Golubuff, an attorney in New York and an Advisory Board member of the Telework Coalition, join us with his very timely call-to-action regarding the Telecommuter Tax Fairness Act.  Chuck is a true thought leader in the telework/remote working/workshifting space.  WIthout Nicole's tireless efforts, this Bill would not have progressed as far as it has.

Although there has been dissension in Washington on just when to tackle reauthorization of the country's transportation funding bill (SAFETEA-LU), once lawmakers and the Obama Administration agree to focus on it, they must make sure the new legislation strongly encourages telework.  They must do the same as they develop new energy legislation.
 By reducing the number of people who rely each day on roads and mass transit, telework lowers the cost of maintaining, fixing and expanding such infrastructure. At the same time, it enables the nation to conserve fuel, improve its energy security and reduce greenhouse gas emissions.

A crucial component of any plan to encourage telework is clearing away significant roadblocks to it.  One of these roadblocks is the telecommuter tax.  A bill pending in Congress called the Telecommuter Tax Fairness Act (H.R. 2600) would get rid of this barrier to Web-based work.  This legislation must become law.

What is the telecommuter tax?  Currently, under a state doctrine known as the "convenience of the employer" rule, when an employee works for a company located in a different state and chooses to telecommute some of the time, the employer's state may tax the employee on 100% of his wages - not just the wages he earns when he travels to the employer's state, but also the wages he earns in his state of residence.  Because the states where telecommuters live can also tax their residents on the income they earn at home, telecommuters risk double taxation of their at-home income.  

In some cases, to protect them from the double tax risk, the home state will give telecommuters a credit for taxes they pay the employer's state on their home state wages.  However, this approach may not solve the problem:  When the employer's state has a higher tax rate than the home state, telecommuters have to pay that higher rate on the income earned at home:  They are still penalized for choosing to work in a virtual environment.
 
The states where telecommuters live can also take a significant hit because of the telecommuter tax.  When they give their residents a credit for taxes paid to the employer's state, the home states essentially surrender their own revenue to the employer's state:  They supply the funding for such public services as police, fire and transportation in the employer's state, even though their residents working from home rely on those services at home.  In the current economy, the many states faced with having to reduce or eliminate their own services can ill afford to subsidize the services offered elsewhere.

Consider the case of Scott Smallwood.  Scott is a resident of Arlington, Virginia.  He works for a financial services firm in New York, a state which applies the telecommuter tax aggressively.  Although Scott spends only a few work days each week in New York and the rest, working from the office his employer set up in his Virginia home, New York has demanded that he pay taxes on all his wages - both the wages he earns on his New York days and the wages he earns on his Virginia days.  Virginia has given him a credit for taxes he has paid New York on his Virginia wages.  However, New York's tax rate is higher than Virginia's, so both he and his home state have suffered:  For several tax years, Scott paid the higher New York rate on his Virginia income, and Virginia received no income tax from Scott.

Because the telecommuter tax makes working across state lines via the Web unduly expensive for employees, it is a potent deterrent to this green work practice.  As one Connecticut resident has explained, "I had to stop working from home for [my] firm in New York City because my taxes were out of sight."

The Telecommuter Tax Fairness Act would bar states from taxing non-residents on the income they earn at home, abolishing the stiff punishment for using virtualization technologies to get to work.  The bi-partisan bill was introduced by U.S. Representatives Jim Himes (D-CT) and Frank Wolf (R-VA) and has been co-sponsored by eleven other lawmakers representing states from east coast to west. 

As forward-looking companies design the cutting edge tools that facilitate efficient collaboration among decentralized workers, neither New York nor any other state should be permitted to frustrate such collaboration by menacing interstate teleworkers with double or excessive taxation.  To maximize the transportation and environmental benefits of using virtualization technologies to reach the office, Congress should pass the Telecommuter Tax Fairness Act.

To help build continued support for the Bill, I have created a petition which is being sent to Congress.  I encourage you to sign the petition and help pass the Telecommuter Tax Fairness Act.

If you would like to track the progress of the Telecommuter Tax Fairness Act as it moves through Congress, head on over to OpenCongress.

Photo by: jmd41280