Relocation and State Tax Law Issues

Relocation has been impacted by federal tax law changes in the United States. Relocation tax information for federal and state law changes impact all organizations.

Certainly, you will recall the challenges we all experienced at the beginning of this year due to the change in Federal tax law which removed the tax exclusion for household goods moves and final travel costs. Quick decisions were necessary to determine how to move forward with the tax law changes and whether to provide a level of tax gross-up to employees for these benefits.

While the industry has adjusted to the new Federal tax law, there is still some fluidity at the state level. Many states have declared their intent to follow the Federal tax law changes but others have been silent on this subject. This creates some challenges when dealing with state tax law. It is unclear whether the undeclared states will mirror the Federal tax changes or not.

We believe many more states will eventually take the same approach as was done at the Federal level, in an effort to be consistent and to obtain additional revenue. These changes will work through individual state legislative processes over time, so it is not possible to accurately predict what will happen – and when. Additionally, a state could make a decision in 2018 that is retroactive to the first of the year.
 
In short, we have a moving target on the state taxability issue, at least for the balance of 2018 and potentially into 2019.
 
The Solution
We have reviewed and compiled a list of states where household goods and final move costs are not taxable – for now. These include:  AZ, AR, CA, HI, IN, IA, KY, MA, ME, MN, MS, NC, NJ, NY, PA, SC, VA, and VT.
 
In order to help us define the best process for moving forward, we have also conferred on behalf of our clients with the Worldwide Employee Relocation Council’s legal and tax counsel, Pete Scott, on what he is seeing on the state legislative level and any trends in handling this issue.
 
Next Steps
For the eighteen states listed above, NuCompass will continue to report household goods and final travel costs as taxable items to our client’s payroll departments. This will provide an overall consistent and conservative approach that both NuCompass and the payroll teams can rely on for tax reporting.

NuCompass will continue to monitor the tax law changes on our client’s behalf and provide periodic updates. Hopefully, the remaining states will declare a position in the near future. At year-end, we will have a clearer picture of individual state actions regarding this topic. We will report any significant updates as they occur.
 
If you have any questions on this issue, please feel free to contact us directly.