Tax Professor Previews Case Against New York Remote Work Rule

The plaintiff in tax litigation challenging the constitutionality of New York’s “convenience of the employer” test, said Wednesday he would push back forcefully against the state in a reply brief that’s due before the state’s Tax Appeals Tribunal in two weeks.

Edward Zelinsky, a professor of tax law at Yeshiva University’s Cardozo School of Law, said New York has failed to make a constitutionally sound argument in defense of its convenience rule, by which it levies income tax on the earnings of out-of-state residents who are employed by a New York business but perform a portion of their duties from their homes. Zelinsky, presenting his views Wednesday to state tax administrators attending the Multistate Tax Commission’s annual meeting in Austin, said he plans to file a reply brief with Administrative Law Judge Jessica DiFiore by Aug. 7.

Zelinsky said New York’s convenience test violates the constitutional principle of fair apportionment and serves as an illegal extraterritorial tax of his earnings. The state’s posture was particularly egregious during the period of the Covid-19 pandemic when Zelinsky and thousands of similarly situated out-of-state workers were barred from their New York offices and worked remotely from their homes. In Zelinsky’s case, he taught all of his law school classes virtually from his home in Connecticut.

“States must apportion reasonably,” Zelinsky said during a panel discussion. “They can’t apportion in a way that distorts or is arbitrary. What could be more arbitrary than for New York to say—for nine-and-a-half months, when Governor Cuomo forbade me from coming to my New York office—that they want to tax 100% of my income for that period under employer convenience even though zero percent was earned within New York’s borders?”

Constitutional Encroachment

Michael Fatale, general counsel for the Massachusetts Department of Revenue, said he was “agnostic” on the wisdom of New York’s convenience rule, but he defended the state’s authority to create and enforce the rule as a matter of state tax sovereignty. Fatale, who spoke during the same panel discussion, plans to publish a law review article in the Boston College Law Review warning against judicial encroachment on state taxing authorities.

“There are good reasons why a state or city might go down that path. There are plenty of arguments on why a city or state should not go down that path,” he said. “Those decisions should be made by policymakers. I’m agnostic on that. My thesis is simply that there should be limited constitutional encroachment if a state goes down that path.”

Zelinsky conceded his quest against New York is something “only a nutso law professor would litigate over,” noting the economic consequences to him personally are modest. His gross taxes paid to New York total around $12,000 annually, roughly $2,000 more than he might have paid if his income had been properly apportioned between New York and Connecticut. Connecticut provides a credit for taxes paid to another state.

Still, the constitutional principles and the unfair tax burden imposed on thousands of average people living primarily in Connecticut and New Jersey are worth fighting about, he said.

“The people who are being schlanged by New York are middle class people, commuters, people who can’t pay for litigation and that’s why I am bringing the case,” Zelinsky said.

The case is In re Zelinsky, N.Y. Tax App. Trib., No. 830517, 6/14/23.