A RECENT DECISION by New York's highest court has intensified concerns about a tax problem confronting many telecommuters.

New York's Court of Appeals ruled last week that a computer specialist from Nashville, Tenn., had to pay New York taxes on 100% of his income from a New York employer -- even though he spent only about 25% of his time in New York and the other 75% in Tennessee. The computer specialist, Thomas L. Huckaby, had argued that he owed New York tax on only 25% of his pay.

At issue is a New York tax-department regulation, adopted decades ago, that affects many employees, such as Mr. Huckaby, who live in another state and work for New York employers. The rule governs when their income may be excluded for New York tax purposes. Under this rule, income from work in another state is taxable by New York unless it is done out of state for the "necessity" of the employer. Mr. Huckaby acknowledged he worked in Tennessee for personal reasons.

The decision could give additional impetus to congressional efforts to pass legislation on the issue. Sen. Chris Dodd, a Connecticut Democrat, and Rep. Christopher Shays, a Connecticut Republican, proposed legislation last year to block states such as New York from collecting taxes on employees for work done outside that state.

The Huckaby decision "only underscores the need" for federal legislation, a Dodd spokesman said this week. Rep. Shays says: "It seems to me that a fair standard to apply would be to tax a person based on where he or she is working when the income is earned."

Thomas Bergin, a spokesman for the New York State Department of Taxation and Finance, said yesterday "we are pleased" that the court "correctly continued to uphold the constitutionality" of the department's regulation.

The case is drawing close attention from lawyers, accountants and other tax advisers, since other revenue-hungry states may be emboldened by New York's victory and approve similar measures. "If this decision stands up, there will be virtually no limit on the ability of states to tax nonresident telecommuters," says Peter L. Faber, a New York lawyer at McDermott Will & Emery LLP who represents Mr. Huckaby. Mr. Faber says the decision will be appealed to the U.S. Supreme Court.

The decision came on a 4-3 vote, with a strongly worded dissent. The Huckaby decision is "truly a threat to the growth of telework," says Nicole Belson Goluboff, a Scarsdale, N.Y., lawyer specializing in telework issues.

Only a few states, including New Jersey, have similar rules. But tax lawyers say New York is especially aggressive on this issue.

It isn't certain how many employees will be affected by the Huckaby decision or other similar cases. The U.S. Census Bureau estimates 4.5 million people worked at home in 2003, but that number includes home-based businesses.

The regulation originally was adopted to prevent tax abuse in certain types of cases, says James W. Wetzler, a former New York State tax commissioner who now works at Deloitte Tax LLP in New York City. He says some people who lived outside New York and commuted during the week "were claiming to have worked an hour or so at home on Saturdays and Sundays, and then paying tax on only five-sevenths of their wages to New York," since two of the seven days they claimed to have worked were out of state.

Meanwhile, what can confused telecommuters do? One idea: "If possible, the employee can stay entirely out of New York," says Dan Kusnetz, a partner at Jones Day in New York.