This came up on my Google News feed a little while ago, and I think it's an interesting one to share and discuss. Since this is a state-on-state dispute, it will go directly to SCOTUS as the court of original jurisdiction.
Here's a news article from NBC Boston.
Under normal circumstances, residents of one state who work in another state pay state income tax to the state they are working in, not the state they live in. When they telecommute from home, they are working in their home state and not their work state; as a result, the portion of state income tax corresponding to those telecommuting hours is deducted from their taxes in the work state, and they have to pay state income tax on that income in their home state instead.
Simple, straightforward, and as far as I am aware, totally uncontroversial. Or at least, it was until lots of people started telecommuting due to the whole COVID mess.
This has caused several states, including Massachusetts, to claim that it's only fair for them to get to still tax telework done outside their borders. Specifically, Massachusetts passed an administrative rule restricting the amount of state income tax that may be deducted for out of state remote work based on the percentage of work that was done remotely prior to COVID quarantine. Basically, they're saying that work which would normally be done in an office in Massachusetts should be taxed as if it had been, and only work that would normally be out of state telework should be deducted.
Massachusetts officially finalized that rule on Friday, so the governor of New Hampshire has announced today that they will be launching an immediate legal challenge, i.e. as soon as the courts open for business on Monday.
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In my opinion, New Hampshire is clearly in the right here. There is absolutely no legal justification for saying that work that was actually performed in State X should be taxed as if it was performed in State Y, especially since that would also mean the income is actually double taxed in both State X and State Y.
Here's a news article from NBC Boston.
Under normal circumstances, residents of one state who work in another state pay state income tax to the state they are working in, not the state they live in. When they telecommute from home, they are working in their home state and not their work state; as a result, the portion of state income tax corresponding to those telecommuting hours is deducted from their taxes in the work state, and they have to pay state income tax on that income in their home state instead.
Simple, straightforward, and as far as I am aware, totally uncontroversial. Or at least, it was until lots of people started telecommuting due to the whole COVID mess.
This has caused several states, including Massachusetts, to claim that it's only fair for them to get to still tax telework done outside their borders. Specifically, Massachusetts passed an administrative rule restricting the amount of state income tax that may be deducted for out of state remote work based on the percentage of work that was done remotely prior to COVID quarantine. Basically, they're saying that work which would normally be done in an office in Massachusetts should be taxed as if it had been, and only work that would normally be out of state telework should be deducted.
Massachusetts officially finalized that rule on Friday, so the governor of New Hampshire has announced today that they will be launching an immediate legal challenge, i.e. as soon as the courts open for business on Monday.
-----
In my opinion, New Hampshire is clearly in the right here. There is absolutely no legal justification for saying that work that was actually performed in State X should be taxed as if it was performed in State Y, especially since that would also mean the income is actually double taxed in both State X and State Y.