New England Biz Law Update
The U.S. Supreme Court on June 28 declined to take up a lawsuit New Hampshire filed challenging Massachusetts’ application of its income tax on residents working remotely from other states during the pandemic, a case that financial analysts said could have resulted in “the reallocation of billions of income tax dollars between certain states.”
In October, New Hampshire sued Massachusetts’s Department of Revenue over a pandemic-era policy imposing income tax on out-of-state residents who are working remotely for Massachusetts businesses, with Gov. Chris Sununu declaring the policy a “direct attack” on his state’s sovereignty and its appeal as an income tax-free state.
“All compensation received for services performed by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency was an employee engaged in performing such services in Massachusetts, and who is performing services from a location outside Massachusetts due to a Pandemic-Related Circumstance will continue to be treated as Massachusetts source income subject to personal income tax,” the DOR declared in an emergency regulation initially put into place last July as telecommuting was widely adopted and work became separated from the workplace for many people.
As of 2017, there were more than 103,000 New Hampshire residents working for Massachusetts-based companies, representing more than 15 percent of all New Hampshire workers, the state said in its complaint. A major credit rating agency pointed to an analysis from a New Hampshire economic advisor that estimated that Massachusetts collects about $1.2 billion from New Hampshire residents who work remotely but are employed by an organization located in Massachusetts.
The Supreme Court denied New Hampshire’s motions for leave to file bills of complaint, though the order noted that Justices Clarence Thomas and Samuel A. Alito Jr. would have granted the motions.
