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1 Jared Walczak, Teleworking Employees Face Double Taxation due to Aggressive "Convenience Rule" Policies in Seven States 1 (2020)

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in                           Teleworking Employees Face Double Taxation
                             Due to Aggressive Convenience Rule

                             Policies in Seven States

 FI SCAL                     Jared Walczak
 FACT                        Vice President of State Projects
 No. 724
 Aug. 2020                   Key   Findings


                                  When   a person lives in one state but works in another, they may have tax
                                   liability in both states, but typically receive a tax credit to eliminate double
                                   taxation of that income.

                                  Seven states, however, tax people where their office is even if they do not
                                   actually work in the state, and these individuals may be denied their home
                                   state's credit for taxes paid to another state, exposing them to double
                                   taxation.

                                  Six states-Arkansas, Connecticut, Delaware, Nebraska,  New  York, and
                                   Pennsylvania-had   implemented  so-called convenience rules prior to the
                                   COVID-19   pandemic, while Massachusetts  adopted  a temporary income
                                   sourcing rule with the same effect in response to pandemic-era telework.

                                  In New  Hampshire, which  forgoes an income tax and is home to many
                                   residents who normally work  out of offices in Massachusetts, the state
                                   Department   of Justice is exploring Massachusetts' new sourcing rule with an
                                   eye to possible litigation.

                                  There is also renewed bipartisan interest in a federal remedy that would
                                   restrict states' ability to impose income taxes on people not physically
                                   present in the state.

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