Amicus Curiae Brief — Burlington Northern Railroad Co. Employees v. Montana Department of Revenue

Supreme Court, US,

FILEQD

No. 89-1181 : FEB Dn ue

—————— ———— acne SPANIOL, JR,

CLERK

In The

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-

Supreme Court of the United States

October Term, 1989

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BURLINGTON NORTHERN RAILROAD

COMPANY EMPLOYEES,

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Petitioners,

MONTANA DEPARTMENT OF REVENUE,

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wmnsidont

Re S} ONGeHT.

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BRIEF OF AMICUS CURIAE

WASHINGTON STATE LEGISLATIVE BOARD OF

UNITED TRANSPORTATION UNION IN SUPPORT

OF PETITION FOR A WRIT OF CERTIORARI

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*Toun R. Quintan

R. Blair STRONG

Of -

Paine, HAMBLEN, COFFIN,

Brooke & MILLER

1200 Washington Trust

Financial Center

Spokane, Washington 99204

(509) 455-6000

Attorneys for Amicus Curiae

* Counsel of Record

‘a

February 20, 1990

TABLE OF CONTENTS

Page

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INTERES! OF tHe AMICUS CURIAE............. 2

REASONS FOR GRANTING THE PETITION....... 6

A. THE LEGISLATIVE HISTORY OF 49 U.S.C.

§11504 INDICATES THAT THIS LAW WAS

ENACTED TO RELIEVE THE BURDEN ON

INTERSTATE COMMERCE CAUSED BY THE

INCOME TAX POLICIES OF SOME STATES

INSOFAR AS SUCH POLICIES AFFECT THE

INCOME OF INTERSTATE CARRIER

NN CF ION Se Chie shad eee R eee e eee Obed he aes 6

B. THE MONTANA SUPREME COURT DECISION

VIOLATES 49 U.S.C. §11504 AND SHOULD BE

SET ASIDE AS VIOLATING THE COMMERCE

AND SUPREMACY CLAUSES OF THE USS.

CEES es EE ee creates Cee eels

C. EVEN ABSENT CONGRESSIONAL ACTION,

THE MONTANA INCOME TAX INFORMATION

REQUIREMENTS AND UNDERLYING TAX

VIOLATE THE COMMERCE AND SUPREMACY

se SO earn area a ere Merry sre ae 1]

CONCLUSION

Pe ES OS 0K Grae Hea eek Ov RO DA OKOKER EROS App. |

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TABLE OF AUTHORITIES-

Page(s)

Cases

Amerada Hess v. New Jersey, 490 U.S. __, 109 S.Ct.

1617, 106 1.0 2b 56 (S508). . Gectee Fike

Blangers v. Idaho, 763 P.2d 1052 (Ida. 1988), cert.

denied, US. _, 109 S.Ct. 1557, 103 L.Ed.2d

et.) Em arrears

Burlington Northern Inc. v. Montana Department of

Revenue, 761 P.2d 1121 (Mom. 2969)... se

Gibbons v. Ogden, 22 U.S. 186, 9 Wheat. 186, 6 L.Ed.

p< t+. | MIS Se 9

Grooms v. Montana, Flathead County, Montana,

District Court Cause No. DV-89-242B ............ 4,5

Hamm v. Rock Hill, 397 U.S. 306, 85 S.Ct. 384, 13

L..BG.20 SOO (1964). 20... 0 soe ee 10

Hinson v. Lott, 75 U.S. (8 Wall.) 148, 19 L.Ed. 387

CPG) ooo koe a nn sod Vee ee eee 11

Jones v. Rath Packing Co., 430 U.S. 519, 51 L.Ed.2d

604, S97 SA. 1305- (19777)... a eee 12

Mountain States Tel. & Tel. Co. v. Pueblo of Santa

Ana, 472 U.S. 237, 86 L.Ed.2d 168, 105 S.Ct. 2587

t )..) Beer IAN 12

Reiter v. Sonotone Corp., 442 U.S. 330, 60 L.Ed.2d

931, 99 S.Ct. 2326 (1979); es. eee 12

STATUTES

49 USA. S20(a) 3... ee 6

oe 44: SUSE. eee 4, 5, 7, 69, oka te

USA. 11500)... . oe 3, 57 oe to

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TABLE OF AUTHORITIES - Continued

Page(s)

TE IONE SE os ce ee eee eek esectanda eee 3

LEGtSLATIVE MATERIALS

Conference Report No. 91-1666, 91st Cong. 2d

i Ree Lae oN 0 Ss acho 5K Wie ae se ee a sR 6, 7

ee as se kag eh wees ak CAGE ORD 6

ee sah naa auee deed nme ee be eta 4

he a a a's uke on Rae TORS 6

S. Rep. No. 1261, 91st Cong. 2d Sess. (1970)

Ee eta le Vk aa IA or Pe ee en

CONSTITUTIONAL PROVISIONS

ED eo, Tk. Se reece

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OTHER AUTHORITIES

Rowland and Vache, Taxing a Moving Target, 22

Idaho L.Rev. 343 (1986)

No. 89-1181

4

4

In The

Supreme Court of the United States

October Term, 1989

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4

BURLINGTON NORTHERN RAILROAD

COMPANY EMPLOYEES,

Petitioners,

MONTANA DEPARTMENT OF REVENUE,

Responden ¢

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BRIEF OF AMICUS CURIAE

WASHINGTON STATE LEGISLATIVE BOARD OF

UNITED TRANSPORTATION UNION IN SUPPORT

OF PETITION FOR A WRIT OF CERTIORARI

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wr

This brief amicus curiae is filed with the written

consent of the parties. The letters giving consent accom-

pany this brief filed with the Court.

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OPINION BELOW

The Supreme Court of the State of Montana issued its

Opinion in this case which is reported at 781 P.2d 1121

(1989). A copy of the Montana Supreme Court’s Opinion

is also included in the Petition for Writ of Certiorari at

ho

Petitioner's Appendix A-11. The amicus curiae cites the

Petitioner’s Appendix when reference is made herein to

the Opinion.

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4

INTEREST OF THE AMICUS CURIAE

The Washington Legislative Board of the United

Transportation Union represents State of Washington

chapters of the United Transportation Union. The office

of the amicus curiae is located at Olympia, Washington.

The Petitioners, Burlington Northern Railroad Company

Employees, are members of the United Transportation

Union. The Washington Legislative Board oversees and

promotes the legislative interests of the Washington

United Transportation Union employees.

The Petitioners are all residents of the State of Wash-

ington. State taxation of income of non-resident

employees of. transportation companies is of particular

interest to transportation employee residents of the State

of Washington, because Washington does not have an

income tax. Because of the absence of a State income tax,

there is no income tax credit in Washington available to

resident transportation employees on account of taxes

paid to another State. Any fore’7n State income taxes

imposed on Washington transportation employees are

therefore extra tax burdens. For Washington resident

transportation employees who pass through several

income tax States, the heavy tax burden is compounded.

An additional burden is the withholding and reporting

requirement imposed by multiple jurisdictions. (For a

discussion of the overall tax problems of interstate trans-

portation employees, see S. Rep. No. 1261, 91st Cong. 2d

Sess. (1970) in the Appendix hereto.)

Since 1982 the Washington resident rail transporta-

tion employees, some of whom are the Petitioners herein,

have been engaged in disputes with both the States of

Montana and Idaho respecting the application of State

income taxes to them. The imposition of Montana and

Idaho income taxes arose by virtue of their employment

on transcontinental “through” freight trains which tra-

verse both States. The Idaho dispute was resolved in 1988

in the Supreme Court of Idaho in Blangers v. Idaho, 763

P.2d 1052 (Ida. 1988), cert. denied, _ US.__, 109 S.Ct.

ro-r.

1357, 103 L.Ed.2d 860 (1989).! The Idaho Supreme Court

held that there was insufficient nexus present under

either the due process clause (Amend XIV, §1) or com-

merce clause (Art I, §8, cl. 3) of the U.S. Constitution to

subject the employees to Idaho income tax.

' The tax disputes have been disruptive of relations

between the different States involved. The Idaho dispute with

the Washington transportation employees resulted in what the

media termed “a tax border war” between Washington and

Idaho. The Washington and Utah legislatures because of

‘ncome tax disputes with Idaho during this period over the

transportation employee issue, enacted retaliatory legislation

against Idaho residents. The Idaho legislature ultimately

enacted Idaho Code §63-3023B which exempted transportation

emplovees earning less than 50% of their compensation in

Idaho from Idaho income taxes. If the Congressional enactment

49 U.S.C. §11504(d) had been followed, it is unlikely the States

would have pursued these matters and these disruptions and

the problems confronting the transportation employees would

not have occurred.

Several of the Employees have brought a legal action

in a Montana court? for a determination of whether they

are subject to Montana income tax or whether the consti-

tutional nexus principles followed in Blangers apply.

When assigned to these particular transcontinental routes

across Idaho and Montana, these employees board the

transcontinental “through” freight trains in Spokane;

Washington, and travel across Idaho to Whitefish, Mon-

tana. At Whitefish they leave the trains, which continue

eastbound on a transcontinental route. After a rest period

at Whitefish, as required by federal law, the emplovees

return on westbound trains to Spokane. The employees

receive their train orders from outside both the States of

Idaho and Montana.

In 1970 Congress enacted Public Law 91-569, which

included what is now 49 U.S.C. §11504, the statute at

issue in this case. 49 U.S.C. §11504 does not deal directly

with the taxation of interstate transportation employees.

Rather, the statute limits the furnishing of income tax

information and other reports by an employer to the State

of an employee’s residence and the State where the

employee earns more than 50% of his income. The

employees in this case do not earn more than 50% of their

income in Montana.

The only issue in this case is whether Burlington

Northern Railroad Company must furnish income tax

information and other reports to the Montana Depart-

ment of Revenue pertaining to non-resident transporta-

tion employees. The case does not deal with the question

a

2 Grooms v. Montana, Flathead County, Montana, District

Court Cause No. DV-89-242B. The hearing on this Declaratory

Judgment action is stil pending.

SI

of whether the employees are taxable in Montana. How-

ever, the Montana Supreme Court in its Opinion, assumes

that the employees are subject to Montana income tax

because “such employees, while in Montana, enjoy the

comfort and protection of Montana’s civil and criminal

laws, and so must share a proportionate burden of the

cost of such protections”. Burlington Northern Inc. v. Mon-

tana Department of Revenue Opinion at A-11, 12 of Peti-

tioner’s Appendix. Whether the Emplovees are taxable in

Montana is in dispute.“ In any event the Montana tax-

ability of the Employees is not an issuein this case. The

only issue is Montana’s power by subpoena or otherwise

to require the employer to furnish employee tax informa-

tion under the provisions of 49 U.S.C. §11504.

~ *

—

~ * The assumption by the Montana Supreme Court that the

employees are taxable in Montana, although unnecessary to

the Opinion, also apparently prejudges the dispute in Groonrs,

supra note 2. The Montana Supreme Court Opinion ignores

Blangers which deals with the general and constitutional taxa-

tion principles applicable to the unique situation of these

workers whose employment on interstate trains takes them

across Montana and Idaho. The Supreme Court of Idaho in

Blangers held that the constitutional nexus required for impos-

ing a State income tax involves more than providing a non-

resident traveler protection and comfort while within the

taxing state. A contrary holding would have meant that any

non-resident working traveler traversing a taxing State would

be subject to that State’s income tax regardless of whether the

traveler did any business in that State, an untenable result.

6

REASONS FOR GRANTING THE PETITION

A. THE LEGISLATIVE HISTORY OF 49 U.S.C. §11504

INDICATES THAT THIS LAW WAS ENACTED TO

RELIEVE THE BURDEN ON INTERSTATE COM-

MERCE CAUSED BY THE INCOME TAX POLI-

CIES OF SOME STATES INSOFAR AS SUCH

POLICIES AFFECT THE INCOME OF INTER-

STATE CARRIER EMPLOYEES.

What is now 49 U.S.C. §11504(d) was enacted in 1970

and reads as follows:4

(d) A rail... private carrier withholding pay

from an employ ee under subsection (a) or (b) of

this section shall file income tax information

returns and other reports only with -

(1) the State and subdivision of residence

of the employee; and

(2) the State and subdivision in which

withholding of pay is required under sub-

section (a) or (b) of this section.

4 Between the date of its enactment in 1970 and 1978 this

provision, though not in these exact words, was embodied in

49 U.S.C. §26(a). 49 U.S.C. §26(a) was recodified in its sub-

stance along with other Interstate Commerce Act provisions in

1978 in P.L. 95-473 to its present 49 U.S.C. §11504(d). It should

also be noted that the House proposal to restrict income ax

reporting requirements found in HR 10634 in 1970 was even

more restrictive than the Senate proposal ultimately adopted

by the House-Senate Conference Committee. The House,

though recognizing possible tax liability to a transportation

employee, would have limited income tax information report-

ing to the State of employee residence only. See first paragraph

of quotation from Conference Report No. 91-1666, 91st Cong.,

2d Sess. (1970) “Filing Information Returns” infra p. 7

~

The Senate-House Conference Committee makes the

following statement concerning what is now 49 U.S.C.

§11504(d):

FILING INFORMATION RETURNS

The House bill provided that only the State

of the employee’s residence could require the

filing of information returns for income tax

purposes.

The Senate amendment provided that both

the State of employee’s residence and the State

in which he earned more than 50% of his com-

pensation could require the filing of information

returns for income tax purposes.

The conference substitute follows the Senate

amendment.

Conference Report No. 91-1666, 91st Cong. 2d Sess.

(1970).

Further legislative history of 49 U.S.C. §11504 are

found at S. Rep. No. 1261, 91st Cong. 2d Sess. (1970),

relevant portions of which are reprinted herein. Amicus

Appendix, pp. I to 7. S. Rep. 1261 indicates that there was

an extensive legislative hearing on this legislation with

testimony taken from State tax agencies, governmental

transportation officials and representative of the trans-

portation industry itself. (Amicus Appendix, pp. 3 and 4.)

The burdening of interstate commerce by the income tax

policies of some States necessitated the legislation.

(Amicus Appendix, pp. 1 and 2.)

S. Rep. 1261 points out not only the problems of

employers who must withhold tax and report payroll

information for multiple States but also the State income

tax problems of transportation employees who traverse

multiple States in the course of their employment:

_ There is no uniform taxing formula which must

be applied by the States with the result that it is

possible for an employee to be subjected to tax

liability in a number of different states. (Amicus

Appendix, p. 3.)

49 U.S.C. §11504 was enacted to benefit both the

employer, burdened with administrative reporting

requirements, and the employee, burdened with paying

taxes and reporting income in multiple States. As evi-

denced by the Committee Reports, Congress was con-

cerned with the lack of uniformity in the State practices

respecting the ambulatory transportation employees, and

what ultimately was enacted as 49 U.S.C. §11504(d) was

the solution of Congress to multiple and inconsistent tax

reporting requirements which burdened interstate com-

merce. Congress did not exempt interstate employees

from taxation in States where they do not earn more than

50 percent of their income. Nor did Congress forbid

States from taking other steps to collect taxes from non-

resident workers, such as contacting the workers directly.

Congress did, however, mandate in 49 U.S.C. §11504(d)

that if any employee does not earn more than 50 peicent

of his income in any given State, income tax information

shall not be furnished by the employer to that State unless

it is the State of the employee's residence. Moreover, S.

Rep. 1261 specifically indicates that a State which is nei-

ther the residence nor more than 50% earnings State of

the employee (e.g. Montana in this case) lacks the power to

require the employer to furnish employee tax informa-

tion. (Amicus Appendix, p. 7.)

B. THE MONTANA SUPREME COURT DECISION

VIOLATES 49 U.S.C. §11504 AND SHOULD BE SET

ASIDE AS VIOLATING THE COMMERCE AND

SUPREMACY CLAUSES OF THE U.S.

CONSTITUTION.

This case arises from a collision between the power

of the Congress under the Commerce Clause (Art. I, 88,

cl. 3) to limit the manner in which States may enforce

their tax laws against nonresident employees of interstate

carriers and the power of the State of Montana to choose

the method of enforcing its tax laws. The Supremacy

Clause (Art. VI, cl. 2) requires that the laws of Montana

vield to laws enacted by Congress. Gibbons v. Ogden, 22

U.S. 186, 9 Wheat. 186, 6 L.Ed. 23 (1824). Congress did not

merely suggest in 49 U.S.C. §11504(d) that the payroll

information under the circumstances of this case not be

furnished; it prohibited it.

The decision of the Montana Supreme Court asserts

an unfettered power by the State of Montana to require

the furnishing of earnings information of non-resident

employees of interstate Carriers:

Since the furnishing of such information is nec-

essary for the Department of Revenue properly

to administer and apply the Montana state

income tax on nonresident employees, the

requirement that Burlington Northern furnish

such information pursuant to the administrative

subpoena cannot be an unreasonable burden on

interstate commerce.

Burlington Northern, Inc. v. Montana Department of Revenue,

Opinion at p. A-11 of Petitioner’s Appendix. The Opinion

is a direct challenge upon the authority of Congress to

10

limit the manner in which States may enforce their taxa-

tion statutes against nonresidents.

That Congress intended to exercise its power under

the Commerce Clause is illustrated by the legislative

history of 49 U.S.C. §11504. Contrast the following state-

ment from S. Rep. No. 1261 with the quotation imme-

diately above from the Opinion of the Montana Supreme

Court in this case:

The Senate Commerce Committee in favorably

reporting this legislation determined that inter-

state commerce is unreasonably burdened by

certain income taxation policies of some States

insofar as such policies affect interstate carrier

employee’s income.

S. Rep. No. 1261, 91st Cong., 2d Sess. (1970). (Amicus

Appendix, pp. 1 and 2.)

There cannot be two more diametrically opposed per-

spectives than that of the Congress which views some

taxation reporting requirements imposed by States upon

non-resident interstate carrier employee’s income as an

unreasonable burden upon interstate commerce, and that

of the State of Montana which views the mandatory fur-

nishing of tax information from such employees as not

being an unreasonable burden. However, Congress

expressly exercised its power under the Commerce

Clause by enacting 49 U.S.C. §11504, resulting, therefore,

in a direct conflict between the application of an other-

wise valid Montana enactment and federal law, which

conflict must be resolved in favor of the federal enact-

ment. Hamm v. Rock Hill, 397 U.S. 306, 311-312, 85 S.Ct.

384, 13 L.Ed.2d 300 (1964).

1]

C. EVEN ABSENT CONGRESSIONAL ACTION, THE

MONTANA INCOME TAX INFORMATION

REQUIREMENTS AND UNDERLYING TAX VIO-

LATE THE COMMERCE AND SUPREMACY

CLAUSES.

State legislative authority to burden interstate com-

merce is siete eae d circumscribed by the dormant com-

merce clause, which grants to Congress plenary power

over it. Cf. Amerada Hess v. New Jersey, 490 U.S. ___, 109

S.Ct. 1617, 104 L.Ed.2d 58 (1989). Thus even before Con-

gress takes specific action with respect to State tax or

regulatory requirements, States lack the authority to

enact laws which unduly burden interstate commerce. Id.;

see generally Rowland and Vaché, Taxing a Moving Target,

22 Idaho L.Rev. 343 (1986).

In this case, both reporting requirements and the

underlying State income tax would be preempted by the

effect, in each case, of unduly burdening interstate com-

merce, even absent Congressional action. In 1970, the

Senate Commerce Committee concluded, after extensive

hearings, that the withholding and payroll reporting State

tax problems faced by both employers and employees

unreasonably burden interstate commerce. S. Rep. No.

1261, 91st Cong. 2d Sess. (1970); Rowland and Vaché,

supra, 22 Idaho L.Rev. at 375. The Idaho Supreme Court

agreed in Blangers v. Idaho, 763 P.2d 1052 (Ida. 1988), cert.

dented, __ U.S.___, 109 S.Ct. 1557, 103 L.Ed.2d 860 (1989).

But this is not a case involving Congressional inac-

tion. Congress has very clearly spoken in 49 U.S.C.

§11504, and this Court has repeatedly stated that conflict-

ing State laws must give way to Congressional action.

E.g., Hinson v. Lott, 75 U.S. (8 Wall.) 148, 19 L.Ed. 387

12

(1869); Jones v. Rath Packing Co., 430 U.S. 519, 51 L.Ed.2d

604, 97 S.Ct. 1305 (1977); cf. Amerada Hess, supra.

Respondent herein may argue that Moentana’s tax and

reporting requirements do not “conflict” with 49 U.S.C.

$11504. However, the construction given 49 U.S.C. §11504

by Montana is wide of the mark and such construction

only avoids conflict with §11504 by rendering the provi-

sions of §11504 completely ineffective and meaningless.

This Court has repeatedly-stated that courts are obliged

to give effect to every word Congress used, and every

part of a statute. Reiter v. Sonotone Corp., 442 U.S. 330, 60

L.Ed.2d 931, 99 S.Ct. 2326 (1979); Mountain States Tel. &

Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 86 L.Ed.2d 168,

105 S.Ct. 2587 (1985).

If we give effect to every part of 49 U.S.C. §11504, we

see that Congress prohibited States from collecting

income tax information from employers regarding non-

resident interstate carrier employees not earning more

than half their income in such States. Petitioners fit

squarely within this class. Yet Montana insists that it is

free to collect such withholding information from Peti-

tioner’s employer and that so doing does not conflict

with 49 U.S.C. §11504.

Such an anomalous result should not be tolerated.

This Court should accept review of the instant case, and

reverse.

&

vw

CONCLUSION

This case presents the singular and concise question

of the supremacy of Congress in regulating interstate

commerce in enacting an important federal statute. The

Montana decision nullifies in Montana the federal statute

49 U.S.C. §11504(d). The Montana decision unless

reversed may also serve as a precedent in other States for

the ignoring of the federal law. For the reasons set forth

above the amicus curiae requests this Court to grant the

Petition for Writ of Certiorari.

Respectfully submitted,

*JouNn R. Quintan

R. Brair STRONG

Of -

PAINE, HAMBLEN, COFFIN,

BROOKE & MILLER

1200 Washington Trust

Financial Center

Spokane, Washington 99204

Attorneys for Amicus Curiae

*Counsel of Record

for Amicus Curiae

February 20, 1990

App. 1

APPENDIX

INCOME TAXATION - INTERSTATE

CARRIERS AND EMPLOYEES

House Report (Interstate and

Foreign Commerce Committee)

No. 91-1195, June 15, 1970 [To accompany H.R. 10634]

Senate Report (Commerce Committee) No. 91-1261,

Oct. 1, 1970 [To accompany H.R. 10634]

Conference Report No. 91-1666, Dec. 3, 1970

[To accompany H.R. 10634]

Cong. Record Vol. 116 (1970)

DATES OF CONSIDERATION AND PASSAGE

House September 14, December 8, 1970

Senate October 12, December 8, 1970

The Senate Report and the Conference Report are set out.

SENATE REPORT NO. 91-1261

The Committee on Commerce, to which was referred

the bill (H.R. 10634) to amend the Interstate Commerce

Act and the Federal Aviation Act of 1958 in order to

exempt certain wages and salaries of employees from

withholding for income tax purposes under the laws of

States or subdivisions thereof other than the State of

subdivision of the employee's residence, having consid-

ered the same, reports favorably thereon with amend-

ments and recommends that the bill as amended do pass.

BACKGROUND AND NEED SECTION

The Senate Commerce Committee in favorably

reporting this legislation determined that interstate

App. 2

commerce is unreasonably burdened by certain income

taxation policies of some States insofar as such policies

affect interstate carrier employee’s income.

The problem addressed by this legislation is peculiar

to those employees who are required by the nature of

their employment to work in more than one State on a

regular basis. Tax policies in some States have created

great hardships both for interstate carriers and interstate

carrier employees. Certain States have insisted upon

withholding from employees an amount based upon the

employee’s entire annual income even though the portion

of the employee’s income derived from performance of

duties within the State in question may have represented

a very small proportion of his total income. In many

instances this has meant that some employees were

deprived of a substantial amount of their income

throughout the year. It is no answer that at the end of the

vear a good portion of that money might be returned to

the employee.

The employer is also confronted with serious prob-

lems. State withholding provisions typically require that

the employer determine the amount of income earned by

an employee in a particular State and that the employer

take care of all other administrative details that are

related to withholding. Some States which do not require

withholding nonetheless require the employer to file

periodic information returns. Where several States and

numerous employees are involved, the administrative

load can be extremely onerous for the employer.

However, withholding and the requirement of filing

information returns with all of the jurisdictions asserting

App. 3

a right to tax any portion of the compensation of the

employee are not the only problems. For the employee

multiple State tax liability is itself a burden. There is no

uniform taxing formula which must be applied by the

States with the result that it is possible for an employee to

be subjected to tax liability in a number of different

States.

In hearings before the committee, numerous wit-

nesses, representing all manner of viewpoints on the

issues, appeared or provided statements for the hearing

record. Included among those who testified were repre-

sentatives of the Interstate Commerce Tax Reform Com-

mittee (a group formed by certain members of the

International Brotherhood of Teamsters; Flight Engineers

International Association; Marine Firemen’s Union of the

SIU; Sailor’s Union of the Pacific, SIU; National Engi-

neer’s Beneficial Association; the Airline Pilots Associa-

tion, and the Marine, Cooks, & Stewards of the Seafarer’s

International Union); the Brotherhood of Locomotive

Engineers; Association of American Railroads; Wester

Highway Institute; National Association of Motor Bus

Owners; Congress of Railway Unions; Multistate Tax

Commission; Flight Engineers’ International Association,

AFL-CIO; American Trucking Associations, Inc; Air Lines

Pilots Association; Greyhound Lines; Department of Rev-

enue for the State of Arkansas; National Association of

Tax Administrators; Tax Commissioner for the State of

North Dakota; New York State Department of Taxation

and Finance; Bureau of Revenue for the State of New

Mexico; State of Nebraska, Income Tax Division; Depart-

ment of Revenue for the State of Iowa; Director of Reve-

nue State of Illinois; Income Tax Division, State of

App. 4

Alabama; State Tax Commission, State of Nebraska;

Department of Revenue, State of Alaska; Department of

Revenue, State of Washington; and Air Transport

Association.

The hearing record provides several examples of the

difficulty. One trucking company provided the committee

with information showing that it had numerous drivers

who worked in several different States. For example, 342

of its drivers drove in 19 different States, 397 of its

drivers drove in 11 States and hundreds of additional

drivers for just this one company worked regularly in

five or more States. If the majority of those States taxed

the income of the driver, it can readily be seen that the

employer and the employee would be faced with a monu-

mental task of first of all determining tax liability and

secondly complying with the individual tax laws of every

one of those States. Some of the difficulties created by

multiple State taxation were set forth in the hearings. For

example the following assertions were made:

(1) Proper withholding for nonresident

employees requires complete knowledge of

what are often numerous and often complicated

State laws, rules and regulations.

(2) Determination of the exact amount to

be withheld is very difficult, due to lack of

uniformity among the State withholding laws.

(3) Payroll procedures, even though in

many instances computerized, are subject to

continuous change because the routes traversed

by an individual driver or airline pilot vary

from State to State and in the case of airlines

probably vary on each flight. —

App. 5

(4) The cost of administering the nonresi-

dent withholding requirements is extensive.

(5) In the majority of instances, cost of

administration exceeds the amount of tax with-

held and transmitted to the State.

One of the more burdensome problems is confronted

by airline pilots who in the course of a few hours of

employment might fly over several different States. And

these pilots for the same general route may fly over

different States for different periods of time each time

that same route is flown.

To be sure, not all States impose net income taxes On

individuals. But at the present time 38 States do impose

such a tax. All of those States require withholding on the

full amount earned by residents and 31 of those States

require withholding on amounts earned by residents and

nonresidents within their borders. In addition, numerous

cities impose income taxes and require withholding as to

both residents and nonresidents.

The original version of S. 2044 and H.R. 10634 related

solely to the withholding and reporting problems. Each

State except the State of residence would have been pre-

cluded from requiring reporting or withholding for tax

purposes from the wages of interstate carrier employees.

It became apparent in the course of the committee’s

hearings and later deliberations on the problems con-

fronting interstate carrier employees that elimination of

multiple withholding was only a partial answer and, in

fact, could place the employee in greater jeopardy than he

would have been had the bill not been passed. This is

true because the elimination of a State’s power to require

App. 6

withholding has no bearing on the State power to tax. So

it could easily happen that an employee would find him-

self at the end of the year with tax liability in several

States but with an inadequate amount of money withheld

and consequently a very serious and unexpected financial

burden. Indeed, it has come to the Committee’s attention

since the hearings that certain railroad employees and

others are being required-to file information returns prior

to the taxing date. On the other hand, the hearing record

includes testimony expressing concern that a bill con-

fined to limiting withholding and the filing of informa-

tion returns to the State of an interstate carrier’s

employee's residence, as originally contemplated, might

induce non-resident interstate carrier employees to evade

non-resident State income taxes which might properly be

due.

The Committee concluded, therefore, that legislation

in this area would be incomplete if it did not address the

very basic problem of multiple State tax liability along

with the problem of multistate withholding and/or

reporting for taxation purposes.

SUMMARY OF BILL

The amended bill does three basic things:

(1) Limits power to tax income of interstate carrier

employees to the employee’s State of residence and any

State in which he earns more than 50 per centum of the

compensation paid to him y such employer;

(2) Limits power to require withholding for tax pur-

poses from income of interstate carrier employees to

App. 7

either the State in which such employee earned more

than 50 per centum of the compensation paid to him by

such carrier during the preceding calendar year or the

State of residence;

(3) Limits the power to require the filing of informa-

tion returns to the State of residence and the State by

which withholding may be required.

* . *