Senate panel amends SB 484 to remove "mobile workforce" rule, returns to pre-2019 tax practice
April 21, 2021 | REVENUE & TAX - SENATE, Senate, Committees, Legislative, Arkansas
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Senators voted to pass a clarifying amendment to Senate Bill 484 that removes provisions addressing a so-called "mobile workforce," restoring the state's prior approach to withholding and individual income taxation.
Senator Desmaine, sponsor of the amendment, said the change "strikes all of the language that related to the mobile workforce out of the bill" and returns the law to the understanding that people pay income tax to the state where they work or reside. She said the amendment responds to guidance the Department of Finance and Administration (DFA) issued in February 2019 that created uncertainty about taxing employees of Arkansas-based employers working outside the state.
DFA analyst Paul Gearing told the committee that 2019 returns showed about $2.1 billion in wage income reported by nonresidents and that the agency could not pinpoint a dollar estimate for the amendment's impact but expected it to be "minimal" with the mobile-workforce section removed. Senator Teague and other members had asked about an earlier fiscal note that showed an estimate "up to $22,000,000"; the sponsor said most of that projected impact stemmed from the removed section.
Members pressed for clarity about temporary and contract workers. Senator Johnson asked whether highway contractors and other temporary out-of-state workers would be treated differently under the amendment; the sponsor and DFA explained that, under current law, employers are expected to withhold and account for tax liability for each day an employee works in Arkansas, and the amendment removes a proposed 30-day threshold that would have delayed collection.
After discussion the sponsor moved to pass SB 484 as amended. The committee approved the motion by voice vote.
What happens next: The amendment will travel with the bill as it moves to the full floor; the sponsor said she would supply any updated fiscal analysis (a "green sheet") if DFA's numbers change and pledged to pull the bill down if a later impact proved to be more than minimal.
Senator Desmaine, sponsor of the amendment, said the change "strikes all of the language that related to the mobile workforce out of the bill" and returns the law to the understanding that people pay income tax to the state where they work or reside. She said the amendment responds to guidance the Department of Finance and Administration (DFA) issued in February 2019 that created uncertainty about taxing employees of Arkansas-based employers working outside the state.
DFA analyst Paul Gearing told the committee that 2019 returns showed about $2.1 billion in wage income reported by nonresidents and that the agency could not pinpoint a dollar estimate for the amendment's impact but expected it to be "minimal" with the mobile-workforce section removed. Senator Teague and other members had asked about an earlier fiscal note that showed an estimate "up to $22,000,000"; the sponsor said most of that projected impact stemmed from the removed section.
Members pressed for clarity about temporary and contract workers. Senator Johnson asked whether highway contractors and other temporary out-of-state workers would be treated differently under the amendment; the sponsor and DFA explained that, under current law, employers are expected to withhold and account for tax liability for each day an employee works in Arkansas, and the amendment removes a proposed 30-day threshold that would have delayed collection.
After discussion the sponsor moved to pass SB 484 as amended. The committee approved the motion by voice vote.
What happens next: The amendment will travel with the bill as it moves to the full floor; the sponsor said she would supply any updated fiscal analysis (a "green sheet") if DFA's numbers change and pledged to pull the bill down if a later impact proved to be more than minimal.
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