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Committee hears mobile-workforce bill creating 30-day safe harbor for nonresident withholding and filing
Summary
House File 950 would exempt nonresident employees who work in Minnesota 30 days or fewer from state income tax withholding and filing, with a reciprocity clause; business groups backed the proposal, while some committee members warned it could create large exemptions and reduce state revenue.
Lawmakers and outside groups debated a proposal that would exempt short-term nonresident workers from Minnesota withholding and filing requirements. House File 950, carried in committee April 9, would exclude compensation earned in Minnesota by nonresidents who work in the state for 30 days or fewer and would exempt related withholding requirements for employers when record-keeping and notice provisions are followed.
Supporters described the change as a practical fix for a modern, mobile workforce. Doug Lindholm, special counsel who previously served as executive director of the Council on State Taxation, said many traveling workers and employers are unaware of multistate filing obligations and that a 30-day safe harbor would reduce noncompliance and administrative burden.
"The problem is is that in nearly half of the states, as soon as that employee sets foot in that state, that employee is required to file by statute a personal income tax return," Lindholm said. "What this bill does is it solves this in a very efficient and very helpful way."
Gino Fragnito, government relations director at the Minnesota CPA Society, and Gavin Hansen of the Minnesota Business Partnership also testified in favor, saying the bill would simplify withholding and reduce penalties for employers and employees on short trips.
Opponents and some committee members pressed on potential revenue loss and edge cases. Chair Gomez asked whether an individual who earned a very large amount during a 29-day stay would be exempt; staff and the bill author clarified the bill includes a reciprocity requirement and that entertainer and nonresident entertainer tax provisions are distinct.
Committee members noted that versions of a 30-day safe harbor are under consideration or in effect for withholding in several other states, and that language would only apply reciprocally with other states that adopt similar protections. The bill was laid over for possible inclusion in the omnibus tax bill.
Why it matters: Supporters say the proposal reduces compliance costs for businesses and workers who travel across state lines and reflects changing work patterns; critics worry the exemption could become a way to avoid tax on high-dollar work performed in Minnesota and stressed the need to evaluate fiscal impacts.
Next steps: House File 950 was laid over for possible inclusion in the omnibus tax bill. Advocates said they will push for reciprocity with other states to maximize the proposal's effectiveness.
