New Jersey is backing a federal suit that seeks to block states from collecting income tax on remote work done by non-residents.
The state on Tuesday filed an amicus brief urging the Supreme Court to hear a suit filed by New Hampshire against Massachusetts that seeks to strike an emergency rule requiring out-of-state residents who work for Bay State companies to pay income tax there even if they work from home in a separate jurisdiction.
“I’m proud to lead the fight for New Jersey taxpayers in the U.S. Supreme Court, and to highlight for the Court that taxing our residents when they work from home in our state is unfair and unconstitutional,” Attorney General Gurbir Grewal said. “This case has a major impact for our state’s bottom line, especially during a pandemic, when unprecedented numbers of employees have been working from home. We hope that the Supreme Court will agree to resolve this issue of nationwide importance.”
New Jersey residents who work in New York pay income tax there and receive tax credits against New Jersey income tax payments.
Amid the pandemic, New York has issued guidance saying out-of-state telecommuters should continue to pay its state income tax even if a given worker does not enter New York.
Estimates by the Treasury’s Office of Revenue and Economic Analysis found New Jersey will award between $929 million and $1.2 billion in tax credits for income taxes paid in New York this year.
“We are hopeful that the Supreme Court will hold that states do not have the constitutional authority to tax individuals who neither live nor work there,” Gov. Phil Murphy said. “Such a ruling could mean as much as $1.2 billion will go into New Jersey’s treasury to benefit our taxpayers and help our state address the massive fiscal shortfall caused by COVID-19.”
The brief was produced jointly by the Grewal’s office and the State Treasury.
“Treasury is proud to have worked with the Governor and the Attorney General’s office in taking action to seek justice for New Jersey taxpayers. We began working on this issue upon coming into office in 2018. While this situation has existed for many years, the COVID-19 pandemic has further exacerbated it. Treasury’s challenge and priority has been finding a fair and equitable solution that does not overburden our residents,” Treasurer Liz Muoio said.