Biden Officials Tell Top Court to Reject Work-From-Home Tax Case
(Bloomberg) -- The Biden administration urged the U.S. Supreme Court to turn away a New Hampshire lawsuit that challenges Massachusetts’ practice of taxing nonresidents who once worked in the state but now do their jobs from home.
New Hampshire is seeking to sue Massachusetts directly at the high court in a case that would affect billions of dollars in income taxes paid by people who worked from home during the coronavirus pandemic. Should the justices let the case go forward, it could determine the fate of similar, permanent tax laws in New York and five other states.
New Hampshire, which doesn’t impose an income tax, says its neighbor is violating the Constitution’s commerce and due process clauses.
But in a brief filed Tuesday, acting U.S. Solicitor General Elizabeth Prelogar said the case doesn’t involve the type of sovereign interests needed for New Hampshire to invoke the court’s so-called original jurisdiction and file a direct suit.
“Although New Hampshire might prefer that its residents not pay personal income taxes to any government, an independent tax obligation falling on a state’s residents generally is not an injury to that state’s own sovereign prerogatives,” said Prelogar, the administration’s top Supreme Court lawyer.
Arkansas, Delaware, Nebraska and Pennsylvania also tax non-residents for work they do from home for in-state employers. Connecticut taxes nonresidents who work from home but only if their states do so as well.
Connecticut and New Jersey have filed a brief backing New Hampshire, telling the court they are losing massive sums to New York in violation of the Constitution.
Massachusetts says it adopted its rule last year to maintain the status quo during the pandemic. The outbreak meant that people who once commuted into Boston were suddenly doing the same jobs from their homes in New Hampshire, Connecticut or other neighboring states.
Massachusetts says it has no problem with other states taking the same steps, and it offers a tax credit for state residents who pay income taxes elsewhere.
New Hampshire says Massachusetts is taxing work that happens entirely outside its borders, with no guarantee the practice will end when the pandemic is over. New Hampshire, which doesn’t impose an income tax, says its neighbor is violating the Constitution’s commerce and due process clauses.
Under the court’s longstanding practice, states seeking to sue under the court’s original jurisdiction are required to ask permission and show they lack an alternative forum to press their case.
The case is New Hampshire v. Massachusetts, Orig. No. 154.
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