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NJ says billions in taxes ‘sacrificed’ to NY by Garden State’s remote workers

Brittany De Lea
·2 min read

Following in the footsteps of New Hampshire, New Jersey joined a lawsuit this week that seeks to protect the income of non-commuting residents from taxes levied by nearby states during the coronavirus pandemic.

The state of New Hampshire in October filed a complaint with the Supreme Court against the Commonwealth of Massachusetts over its remote worker tax policy, which attorneys for New Hampshire call “an unconstitutional tax grab.”

New Jersey joined what is known as an amicus curiae, urging the court to take up the complaint filed by New Hampshire.

At issue in the original suit is an intra-pandemic measure imposed by Massachusetts that essentially maintains the income tax status quo – meaning if a New Hampshire resident would otherwise be in a Massachusetts office if not for the virus outbreak, that individual would have taxes withheld as though he or she were earning income in the state.

Five other states, in addition to Massachusetts, tax nonresident income earned in their primary state of residence, including New York. In some of those states, however, the measure is permanent.

NO-TAX NEW HAMPSHIRE LAUNCHES LEGAL BATTLE AGAINST MASSACHUSETTS' REMOTE WORK 'TAX GRAB'

In New Jersey, many residents would typically commute to a New York office for work. But lawyers for the state said current work from home rates are as high as 55%, indicating that the Garden State may be crediting $1.2 billion on income to New York through March 2021 for people working at home in New Jersey.

The complaint also states that New Jersey may be crediting between $3.2 million and $4.2 million to residents for taxes paid to Massachusetts – and that Connecticut is in a similar situation with both New York and Massachusetts.

“How this case is resolved means the difference of approximately one billion dollars in revenue for a single state treasury in a single year,” lawyers representing the state said.

State officials may also be thinking about a future where remote work becomes routine, and are seeking to protect residents from having income taxed elsewhere.

Lawyers wrote in the complaint that given massive budget holes induced by the coronavirus pandemic, states are unlikely to be able to reach satisfactory resolutions on their own.

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As previously noted by FOX Business, some workers could be faced with a tax headache next year depending on how their work situation changed during the pandemic.

There are a complex patchwork of state laws governing income taxation, some of which have temporarily changed during the national emergency.

A ruling in this case could have widespread implications, potentially creating challenges for states that have worked out other tax arrangements during the pandemic.

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