Section 40-18-2.2 Exemption of Certain Nonresident Income.

(a) As used in this section, the following words have the following meanings: (1) PROFESSIONAL ATHLETE. An athlete who performs services in a professional athletic event for compensation. (2) PROFESSIONAL ENTERTAINER. An individual who performs services in the professional performing arts for compensation on a per-event basis. (3) PUBLIC FIGURE. An individual of prominence who performs services at discrete events, such as speeches, public appearances, or similar events, for compensation on a per-event basis. (b) Compensation subject to withholding pursuant to Article 2, without regard to any withholding tax exception set forth in this chapter, paid to a nonresident individual is exempt from the tax levied under Article 2 if all of the following conditions apply: (1) The compensation is paid for employment duties performed by the individual in this state on 30 or fewer days in the calendar year. (2) The individual performed employment duties in more than one state during the calendar year. (3) The compensation is not paid for employment duties performed by the individual in the individual’s capacity as a professional athlete, professional entertainer, or public figure. (4) The nonresident individual’s state of residence: a. Provides a substantially similar exclusion; b. Does not impose an individual income tax; or c. The individual’s income is exempt from taxation by this state under the United States Constitution or federal statute. (c) Except as otherwise provided in this chapter, an employer is not required to withhold taxes from compensation that is paid to an employee described in subsection (b). If, during the calendar year, the number of days an employee spends performing employment duties in this state exceeds the 30-day threshold described in subsection (b), an employer shall withhold and remit the tax to this state for every day in that calendar year, including the first 30 days, on which the employee performs employment duties in this state. (d) Notwithstanding any provision of this section to the contrary, there shall be no withholding or remittance obligation, and the compensation shall be exempt from state and local taxes with respect to wages or salary paid to a nonresident who is in this state on a temporary basis for the purpose of performing disaster or emergency-related work in response to a declaration by the President of the United States or the Governor of this State to be an emergency. The provisions of this subsection are supplemental to the exemptions and related provisions of Section 40-31-3 and should not be construed to narrow the provisions of that section. (e) If an employer maintains a time and attendance system that tracks where employees perform services on a daily basis, then data from the time and attendance system shall be used. For purposes of this section, time and attendance system means a system: (1) In which the employee is required, on a contemporaneous basis, to record the work location for every day worked outside of the state where the employment duties are primarily performed; and (2) That is designed to allow the employer to allocate the employee’s wages for income tax purposes among all states in which the employee performs services. (f) The Department of Revenue shall not require the payment of any penalties or interest otherwise applicable for failing to deduct and withhold income taxes as required under Article 2 if, when determining whether withholding was required, the employer met either of the following conditions: (1)a. The employer, at its sole discretion, maintains a time and attendance system specifically designed to allocate employee wages for income tax purposes among all taxing jurisdictions in which the employee performs employment duties for the employer, and relied on data from that system. b. An employer maintaining records under paragraph a. shall not preclude an employer’s ability to rely on an employee’s determination under subdivision (2). (2) The employer does not maintain a time and attendance system, and the employer relied on the employee’s annual determination of the time the employee expected to spend performing employment duties in this state, provided, however, that the employer did not have actual knowledge of fraud on the part of the employee in making the determination and provided that the employer and the employee did not collude to evade taxation in making the determination. (g) For purposes of this section, an employee shall be considered present and performing employment duties within this state for a day if the employee performs more of the employee’s employment duties in this state than in any other state during that day. Any portion of the day during which the employee is in transit shall not be considered in determining the location of an employee’s performance of employment duties. However, if an employee performs employment duties in a resident state and in only one nonresident state during one day, such employee shall be considered to have performed more of the employee’s duties in the nonresident state than in the resident state for such day. (h) The Department of Revenue shall adopt rules necessary for the administration of this section. (i) The provisions of this section shall be effective for tax years beginning on or after January 1, 2026.