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GGD-85-46 1 (1985-04-11)

handle is hein.gao/gaobabnqg0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 2548 GM4CAL @OVONMMNr DIVISON B-217850 APRIL 11, 1985 The Honorable Daniel J. Evans United States Senate The Honorable Slade Gorton United States Senate 126688 Subject: State Income Taxation of Nonresident 1ailroad Employees (GAO/GGD-85-46) On September 27, 1984, representatives from your offices met with members of my staff to discuss legislation that you were con- sidering introducing. This legislation would prohibit a state from taxing the wages of railroad employees domiciled outside the state (nonresident employees) if the employees earned less than half of their annual compensation within the state. Your repre- sentatives asked us to determine whether sufficient data were available to analyze in detail the effects of the proposed federal restriction on state revenues. In particular, your representa- tives were interested in knowing how much revenue each state would lose if the legislation were enacted, We agreed to survey revenue officials of a number of states and payroll officers of several major railroads to determine whether either the states or the railroads maintained adequate data to measure the revenue effects of the proposed restriction. We conducted our survey by telephone in October 1984 and briefed your representatives on the results in November 1984. The results showed that adequate data are not available to measure the revenue effects of the proposed restriction. This report, pro- vided at your representatives' request, summarizes what we learned during our survey. Many states tax wages earned within their borders by both residents and nonresidents. Like the federal government, they rely on employers to withhold income taxes from wages for effi- cient tax administration. However, in the case of railroad employees, federal law restricts what states may require railroad companies to do. Public Law 91-569 requires railroad companies to withhold taxes only for the state in which the employee earns more than half of his or her total compensation, if the employee earns more than half in one state. The law requires the company to report wage and withholding information to that state and to the employee's state of residence, if different. Other states may not require the company to withhold tax from those employees' wages. (268211) JV7 7

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