States and cities are facing the worst fiscal crisis in decades and a little-noticed provision in New York’s tax law could leave billions of dollars in tax revenue up for grabs. This provision is outlined in Section 132.18 (a) of the New York tax code. It states that anyone who works out of an office in New York, but lives out of state -- whether in Westport, Connecticut, or Chatham, New Jersey -- must pay New York income tax. And the Empire State stands out in how strictly and aggressively it enforces the statute, even if your job is done predominately from home.
There is, however, one exception: when work from home is a “necessity,” which is exactly what’s happening now with states imposing shelter-in-place decrees everywhere.
The situation could set up a high-stakes money grab, according to tax lawyers who’ve reviewed the statute. Of course, out-of-staters have repeatedly tried their luck in court to get out of paying New York taxes -- and failed. And New York’s neighboring states are still playing nice. But that could change. “There clearly is an issue here,” said Tom Corrie, a principal at Friedman LLP and director of the firm’s state and local tax group. “It is something I’ve been thinking about and I mentioned it to my colleagues on a Zoom call.”
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