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HR 9244

Business Activity Tax Simplification Act of 2026

119th Congress Introduced by Pat Harrigan

Prohibits states from taxing out-of-state business activity without physical presence, establishing a minimum standard for net income and other business activity taxes.

Introduced in House
0
WeVote Research Nonpartisan
Bill Summary · HR 9244

Overview

HR 9244, the Business Activity Tax Simplification Act of 2026, aims to regulate certain state taxation of interstate commerce and codify a broad prohibition on state taxation that exceeds a minimum federal standard. The bill is designed to limit the ability of states to impose net income taxes or other business activity taxes on out-of-state activities unless a taxpayer has a physical presence in the state. It also clarifies definitions and provides transitional provisions affecting digital goods/services and group returns.

Main purpose and intent

  • To modernize and narrow state tax authority over interstate commerce.
  • To establish a minimum jurisdictional standard that prevents states from taxing non-domiciled businesses lacking sufficient physical presence.
  • To align treatment of “other business activity taxes” with net income tax prohibitions, while clarifying definitions for digital goods/services and group taxation.

Key provisions and changes

  • Section 2: Modernization of Public Law 86-272

    • Expands and clarifies what constitutes activity that may trigger tax obligations in a state.
    • Recasts several subsections to include activities beyond traditional sales, such as:
    • Furnishing information to customers or affiliates from outside the state.
    • Coverage of events or other information gathering in the state by the taxpayer or their representatives.
    • Activities related to digital goods/services and fulfillment of transactions from outside the state.
    • Inserts new prohibitions on states imposing taxes based on these activities unless a physical presence exists.

  • Section 3: Minimum Jurisdictional Standard for State and Local Net Income Taxes and Other Business Activity Taxes

    • No state may impose net income tax or other business activity tax on interstate activities unless the taxpayer has a physical presence in the state.
    • Defines physical presence (employees, agents, or property) and sets a de minimis threshold (e.g., ride-through days limit, such as 15 days, subject to state variation).
    • Outlines exceptions:
    • Domestic entities and individuals domiciled or resident in the state are exempt from these limitations.
    • Taxation of partners and similar entities remains uncaptured if they have physical presence.
    • Protection of state authority against sham transactions and abuse while preserving combined reporting where applicable.

  • Section 4: Group Returns

    • If affiliated entities’ results are combined for tax purposes, the portion subject to tax should follow the generally applicable apportionment methodology, ensuring only the relevant factors from those taxed by the state are counted.

  • Section 5: Definitions and Effective Date

    • Defines net income tax, other business activity tax, and digital goods/services.
    • Specifies that tangible personal property excludes software licensing for purposes of certain provisions.
    • Effective date: Applies to taxable periods beginning on or after January 1, 2026.

Who/what is affected

  • States and political subdivisions: constrained in imposing taxes on out-of-state business activities without a physical presence.
  • Businesses with interstate activities, digital goods/services, and those engaging in group/consolidated returns.
  • Domestic entities and residents/domestic corporations may enjoy certain exemptions under the act.
  • Entities structured as partnerships or pass-throughs may retain existing-state tax liability if they have physical presence.

Procedural and timeline details

  • Introduced June 10, 2026, referred to the House Judiciary Committee.
  • Effective date set for taxable periods beginning January 1, 2026, aligning with or preceding the act’s passage timeline.
  • Applicable to both net income taxes and other business activity taxes as defined in the bill.

Compiled from official sources — confirm details with the bill’s official record.

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