What does Preamble of Business Activity Tax Simplification Act of 2026 do?

This bill aims to regulate certain State taxation of interstate commerce. The bill is formally titled 'To regulate certain State taxation of interstate commerce, and for other purposes.'

What does SHORT TITLE. of Business Activity Tax Simplification Act of 2026 do?

This bill is formally titled the Business Activity Tax Simplification Act of 2026

What does MODERNIZATION OF PUBLIC LAW 86-272. of Business Activity Tax Simplification Act of 2026 do?

This section amends Public Law 86-272, also known as the Interstate Income Tax Act of 1959. Amendments to Section 101 expand the definition of business activities within a state to include the furnishing of information, potential purchases, and sales of digital goods or services. The amendments clarify that a person is not considered to have engaged in business activities within a state solely due to the actions of independent contractors. The Act extends the prohibitions of Section 101, which previously applied to net income taxes, to other business activity taxes beginning January 1, 2019. The legislation defines 'digital good' as software or other goods delivered electronically, and 'digital service' as services provided electronically, including audio services, data processing, and cloud computing.

What does MINIMUM JURISDICTIONAL STANDARD FOR STATE AND LOCAL NET INCOME of Business Activity Tax Simplification Act of 2026 do?

This section establishes a minimum jurisdictional standard for state and local net income and business activity taxes. A taxing authority generally cannot impose such taxes on a person's interstate commerce activities unless that person has a physical presence in the state during the taxable period. Physical presence includes being physically present with employees, using an agent to establish a market (who doesn't perform services for others), or owning/leasing property. Short-term presence (less than 15 days) or transient business activity does not constitute physical presence. The requirements are adjusted pro rata if the taxable period is not a year. The section does not modify existing federal law or state authority allowing greater activities without tax jurisdiction. Domestic businesses and individuals domiciled or resident in the state are exempt from the physical presence requirement. The section does not affect the tax liability of owners or beneficiaries of certain entities (partnerships, S corporations, LLCs, trusts, estates) if the entity has physical presence. States retain authority to enforce laws against illegal activities or abusive business practices to ensure proper tax liabilities. States can still require combined reporting.

What does GROUP RETURNS. of Business Activity Tax Simplification Act of 2026 do?

This section addresses the computation of net income tax or business activity tax liability for persons whose net income or economic results are taken into account for affiliated persons. The portion of combined or consolidated net income subject to state tax shall be computed using a methodology generally applicable to similar businesses. If an apportionment formula is used, the denominator must include aggregate factors of all affiliated persons. The numerator must include factors attributable to the state, limited to persons subject to taxation by the state and all other legal constraints on state taxation of interstate or foreign commerce.

What does DEFINITIONS AND EFFECTIVE DATE. of Business Activity Tax Simplification Act of 2026 do?

This section defines key terms used within the Act. “Net income tax” is defined by reference to the Act approved September 14, 1959. “Other business activity tax” is defined as a tax similar to a net income tax, but excludes sales, use, or similar transaction taxes. “Person” is defined according to section 1 of title 1 of the United States Code, and affiliated corporations are treated as separate persons. “State” includes states, the District of Columbia, territories, possessions, and political subdivisions. The leasing or owning of tangible personal property does not include the leasing or licensing of computer software. This Act applies to taxable periods beginning on or after January 1, 2026.

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Business Activity Tax Simplification Act of 2026

Last updated: 6/10/2026 · Introduced: 6/10/2026

Author: Pat Harrigan (R-NC)

TL;DR (AI)

The bill expands the definition of business activities within a state to include the furnishing of information, potential purchases, and sales of digital goods or services, while clarifying that independent contractor actions do not automatically establish business activity.
It establishes a minimum jurisdictional standard, generally requiring a physical presence in a state (such as employees, agents, or property) before a state can impose net income or business activity taxes on interstate commerce.
The Act defines key terms like 'digital good,' 'digital service,' and 'other business activity tax,' and applies to taxable periods beginning on or after January 1, 2026.

119th Congressin committeeOfficial page

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Includes provisions on preamble, short title., and 4 more.

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