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Eight Ways to Spring Clean Your Mobility Compliance

April 14, 2022

A few simple tasks may help streamline your mobility compliance, making compliance easier for you and less time-consuming (i.e., less costly) for your mobility vendor.

Update Your Mobile Employee List

The first four steps are ways to refine your mobile employee population list(s). Mobility compliance requires constant updating of work location and move data. Most companies seem to add new mobility to the list, but there are some employees who may be eligible to be taken off the list. This is particularly important if the calculations are being done manually or you are sending the employee list to your vendor on a regular basis. You can probably purge employees from the active mobility list if they fall into one of the following scenarios:

  1. Employees who have no outstanding awards from a prior location. If all an employee’s existing awards are granted in the current location and the employee has not worked elsewhere since the grant date, no further allocations for this individual are necessary until another relocation occurs. Make sure to review stock option awards as well as RSUs. Many employees who moved about three to four years ago may not have any outstanding RSUs granted prior to their current location but may need to stay on the list due to outstanding stock options granted prior to mobility.
  2. Employees who moved so long ago that the income allocation to a prior location will likely be under a de minimis threshold. Be careful as a de minimis threshold based on income will be dependent on the stock price at the time of the taxable event.
  3. Employees who moved from a non-taxable location to a taxable location, for example, Florida to New York. These employees will likely be subject to tax only in their current location and, therefore, do not need special attention for mobility compliance.
  4. Employees who are not actually mobile. Some companies record any movement as mobility but that does not necessarily translate to mobility taxation. For example, an employee who moves from Portland, Oregon, to Bend, Oregon, is not mobile for tax purposes and should not be flagged as such.

Clean Up Your Locations List

Although location data is likely imported from the HRIS system, if possible, try to standardize location identifiers.

  1. Classify locations consistently so that all locations are denoted in the same way (e.g., IL for Illinois or TX for Texas). All too often we see variations across employee records with the same underlying fact pattern that make sorting and filtering an employee list difficult, e.g., instead of recording all employees who move from Illinois to Texas as “IL to TX,” employees might be recorded as moving from Chicago to Texas, from Wacker Drive (corporate address in IL) to Austin, or from Illinois to Braker Center (corporate address in TX).
  2. Use three-letter country identifiers and two-letter state/province identifiers. This avoids confusion such as whether CA is for California or Canada. As states and provinces usually are denoted with two-letters, it is best to use three-letter identification for countries. One of my favorite examples is when I was told by a client that an employee was moving from CA to NE. CA could be California or Canada. NE could be Nebraska or Niger. The employee was actually moving from California, US, to the Netherlands. The two-letter code for the Netherlands is NL under the two-letter system or NLD in my preferred three-letter system. Of course, it also helps to get the location identifiers correct.

Update and Improve Your Processes

There are other aspects of mobility that also warrant periodic review and update.

  1. Stay updated with legislative changes. It is best to do an (at least) annual review of the allocation positions your company is taking. While there has not been much new legislation for global equity taxation for mobile employees in the past two years, there has been a tightening of state reporting requirements for remote workers. Many states have issued clearer guidance regarding the reporting of income for mobile employees and remote workers as well as the application of state credits at the withholding level.
  2. It is always a good idea to evaluate your mobility processes periodically. Especially if mobility compliance was introduced or revamped in your company in the last two years, now is a good time to review and re-evaluate processes and seek input from internal stakeholders, such as the payroll and HR and the tax team. Processes reviewed should include data inflows (especially the receipt of mobility data) and data outflows, (such as income allocation and tax withholding information for payroll reporting and remittance purposes).

The ideal situation is to get to a point with your mobility program where you can plan strategically. This includes the HR team and/or the mobility internal partners communicating proactively with the equity team regarding upcoming moves and employees being informed upfront of the tax implications of their potential moves. Communications will be a topic of a future blog. 

  • By Marlene Zobayan


    Rutlen Associates LLC

Marlene Zobayan is a partner at Rutlen Associates LLC, a boutique consulting firm helping companies with their global equity plans and/or mobile employees.