Petition Challenges New York’s Convenience of the Employer Rule

In the era of remote work, New York State has held to its long-standing controversial position that for an employee whose assigned or primary office is in New York, any normal workday spent working at a home office will be treated as a day worked in New York—and income earned for that day subject to New York State income taxes. The rule applies unless the home office meets requirements for a “bona fide employer home office,” a threshold considered extremely difficult to meet.

That so-called “convenience of the employer” rule is being challenged for a second time by Edward Zelinsky, a tax law professor and nonresident of New York State who teaches at Yeshiva University’s Cardozo School of Law, a New York-based institution. He has filed petitions with the New York Division of Tax Appeals contending that the days spent working outside the State should not be taxable to New York. Zelinsky previously challenged the rule unsuccessfully in 2003.

While the challenge is to New York’s rule, the impact could be broader, as other states, including Arkansas, Delaware, Nebraska, Pennsylvania, and to a limited extent, Connecticut, have similar laws. As well, hybrid working arrangements, including working remotely from home, have become more popular and prevalent since the height of the COVID-19 pandemic, and many employees and their companies have implemented technology to make working remotely more efficient and convenient. As such, tax and legal professionals are warning employers, particularly in states with a convenience of the employer rule, to keep an eye on the litigation as it progresses.

If you have questions on State and Local Tax matters, please contact the HBK SALT Advisory Group at hbksalt@hbkcpa.com.