U.S. House Representatives Chris Pappas (D-NH) and Jim Himes (D-CT) have introduced HR 7968, legislation that would prevent states from imposing state personal income tax on employees who are teleworking outside the state. While the bill would have general applicability, it stems primarily from Massachusetts regulations taxing New Hampshire residents. The bill would clarify that workers are required to pay income tax only in the state where they are physically present when the income is earned.
The proposed bill comes after Gov. Sununu of New Hampshire ordered the New Hampshire Department of Justice to investigate whether the Coronavirus emergency regulations concerning income tax on teleworkers published by the Massachusetts Department of Revenue result in the improper collection of personal income tax from affected New Hampshire residents. New Hampshire does not currently impose an income tax on wages.
In an annoucement on social media, Sununu stated that “We need to maintain that New Hampshire Advantage at all costs. The Department of Justice will conduct a review of each state’s Department of Revenue’s actions to determine whether any state is engaging in improper taxation of our citizens.” He continued, “we will take immediate steps to stop any attempts to impose income taxes on Granite Staters in a manner that violates the law or the New Hampshire or United States Constitution.”
Massachusetts emergency regulations provide that effective March 10, 2020, and through December 31, 2020, or 90 days after the state’s emergency order is lifted, whichever is earlier ( TIR-20-10 ), all compensation received for personal services performed by a nonresident, who, immediately prior to the Massachusetts COVID-10 emergency, was an employee engaged in performing services in the state, and who during such emergency is performing services from a location outside of Massachusetts due solely to COVID-19, will continue to be treated as Massachusetts-source income subject to Massachusetts personal income tax and income tax withholding.
In a statement, Rep. Pappas stated that “at a time when many New Hampshire residents are teleworking from home in order to keep their families and their communities safe, it is completely unfair for Massachusetts to levy an income tax on these workers.”