TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, May 6, 2009

Zelinsky: Tax and the Swine Flu

Edward Zelinsky (Cardozo), Swine Flu, Telecommuting and New York’s Extraterritorial Taxation of Nonresidents’ Incomes (Oxford University Press Blog):

To combat swine flu, we should encourage employees to telecommute from their homes rather than travel to their employers’ offices with their attendant danger of communicable disease. ...

A major impediment to telecommuting is New York State’s extraterritorial taxation of nonresidents’ incomes. When a nonresident works at home for a New York employer, New York imposes income tax on the telecommuting nonresident for this out-of-state day even though the nonresident never sets foot in New York on that day and even though New York provides no public services to the nonresident telecommuter on his day working at his out-of-state home. The result of New York’s extraterritorial taxation is typically double income taxation of the nonresident for telecommuting from outside the Empire State. ...

I am something of a poster boy for the irrationality of New York’s extraterritorial taxation of nonresident telecommuters. I am a law professor in Manhattan at the Benjamin N. Cardozo School of Law of Yeshiva University. I live in New Haven, Connecticut. When New York sought to impose its income tax on me for the days I wrote and researched at home in Connecticut, I challenged this extraterritorial tax on constitutional grounds. ...  New York’s courts held that New York can tax me (and other telecommuters) on days worked at home outside the Empire State. New York’s Court of Appeals, that state’s highest court, specifically approved New York’s tax-based discouragement of nonresidents’ telecommuting from their out-of-state homes.

Enter the swine flu.

For the duration of swine flu problem, New York should encourage telecommuting or at least not impede it. In particular, New York Governor David Paterson should announce that, to stimulate telecommuting to combat potential exposure to the new swine flu, New York will suspend its extraterritorial income taxation of nonresidents for all days such nonresidents work at their out-of-state homes.

In any event, Congress should pass the Telecommuter Tax Fairness Act which, if enacted into law, would prevent states from taxing telecommuting nonresidents on the days they work at their out-of-state homes.

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I think Professor Zelinsky should think carefully of the message he is sending to his students by saying the dollars he is paid for research and writing (in CT) are separable and distinguishable from the dollars he is paid for teaching (in NY). From the students' perspective, they are only interested in paying for the teaching, and would be happy to have the school pay him a part-time salary only.

Posted by: Joe Camel | May 6, 2009 12:56:54 PM

So attending Harvard Law School, clerking for Justice Alito, and working at Kirkland & Ellis is not sufficient for the distinguished faculty at FIU? Yikes.

Posted by: Mark | May 6, 2009 2:50:53 PM