Pre-COVID-19, before everyone started telecommuting much more, there already was brewing controversy. This ended up getting fixed by Connecticut in 2019, but it still could have come up in a lot of states. That caused lots of challenges for employers and employees and led to a lot of the old controversy. Connecticut didn't have a convenience rule, historically, so if we had a telecommuter that paid tax in New York, Connecticut wasn't giving their residents a credit for that. That was actually the case in Connecticut for years. The big problem a lot of times was double taxation. All of this, of course, is pre-COVID-19.īut even pre-COVID-19, the challenge was the inconsistency in the rules because only a handful of states had these rules and the states right immediately around New York, like New Jersey, Connecticut, and Vermont, didn't have these rules. Then they extended this, in some other cases, beyond just local telecommuters to people who were working remotely from across the country. The convenience of the employer rule basically says that, "If you're working from home for your own convenience and not out of any employer necessity, the state's going to treat that day as a day worked in New York." So, New York cases started to come out and New York was taking a very broad interpretation of what was a convenience day. In New York this became a hot button issue in part because of New York being a financial center, a commercial center, and being right on the border of a couple other states, and in part because New York took a pretty broad interpretation of what the convenience of the employer rule really meant. Like I said, there wasn't lots of action in this in states outside of New York. That was the initial rationale behind these rules. If the employee could save a couple percentage points in income tax by staying home instead of commuting into work on a particular day, that to the New York legislators and tax department folks seemed like an unfair advantage to people who lived in New York and commuted from their house down the street. States like New York didn't want taxpayers who lived in a border state like New Jersey or Connecticut to get some sort of tax benefit by simply not going to work. The genesis originally was really one around tax avoidance or curbing tax avoidance. New York pretty much being the most notable because the issues seemed to arise most in the New York courts and in New York tax audits. The convenience rule was historically built into the tax law of a handful of states. During the COVID-19 pandemic, there was an increased focus on people working outside of their usual areas, including across state lines, and there was an increased attention focused on convenience of the employer rules.īefore we jump into that, can you give us a quick review of these rules, where they came from, what their original purpose was, and how they've evolved since? Also, what are some of the challenges they pose? Why have these been controversial over the years? I think there's roughly five states that impose them, depending on how you count which states have a rule. Paul Jones: As we know, convenience of the employer rules have been around for a while. Stewart: All right, let's go to that interview. He spoke with me recently about the controversy over states' longstanding convenience rules and also about the potential fallout from these similar temporary withholding rules that a lot of states adopted during the pandemic.ĭavid D. He's a partner in the New York office of Hodgson Russ LLP. Could you tell us about your guest and what you talked about? Stewart: I understand you recently talked with someone about these rules.
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