POSITION STATEMENT IN SUPPORT OF THE
TELECOMMUTER TAX FAIRNESS ACT
January 2006
The undersigned organizations urge the passage of The Telecommuter Tax
Fairness Act (S. 1097, H.R. 2558). This vital legislation would abolish a
steep and often double tax penalty that currently threatens Americans
nationwide who telecommute, or “telework,” for out-of-state employers.
Senators Chris Dodd and Joseph Lieberman, together with Representatives
Christopher Shays, Rosa DeLauro, and Tom Davis have sponsored The
Telecommuter Tax Fairness Act. The bi-partisan measure would eliminate
an income tax rule known as the “convenience of the employer” rule, which a
number of states maintain and which New York applies quite aggressively.
Under the “convenience rule” in New York, for example, nonresidents of New
York who sometimes telecommute to their New York employers may have to
pay New York taxes, not only on the income they earn while working in New
York, but also on the income they earn while working from home outside New
York. Because the employee's state of residence may also tax the income
earned at home, the telecommuter may be double taxed on that income.
Even if the home state provides a credit for taxes paid to New York on the
non-New York income, the employee may be taxed excessively. If New
York's tax rate is higher than the home state's, the telecommuter will have
to pay the higher rate. Further, the telecommuter's tax dollars will be
diverted from the home state to New York, leaving the public schools,
libraries, and other public services that the home state provides the
telecommuter with reduced tax revenue support.
New York's rule threatens the continued growth of home-based work
in the United States. Currently, nearly 10 million Americans telecommute
to their employers at least some of the time. More than 45 million
American workers, including self-employed workers, do at least some
work from home.
New York has demonstrated that it will assert its authority to tax interstate
telecommuters located in any state in the country. Formal rulings reflect
that New York has already targeted telecommuters in Connecticut, Maine,
New Hampshire, New Jersey, Pennsylvania, North Carolina, Florida, and
Tennessee. Moreover, The Telework Coalition, one of the advocacy groups
endorsing The Telecommuter Tax Fairness Act, has been in touch with
telecommuters from coast to coast who have either already been affected
by New York's telecommuting tax or are very concerned about the implications
of the tax for them. New York's overreaching puts telecommuters in all 50
states at risk.
On October 31, 2005, in a highly publicized case called Huckaby v. New York
State Division of Tax Appeals, the U.S. Supreme Court refused to hear the
appeal of a Tennessee telecommuter who was taxed by New York on 100
percent of his income even though he spent 75 percent of his work time in
Tennessee and only 25 percent of his work time in New York. Less than
two years earlier, in a case called Zelinsky v. Tax Appeals Tribunal of New
York, the high court refused to accept the appeal of a Connecticut telecommuter
who, like Huckaby, was disproportionately taxed and challenged the rule under
the U.S. Constitution. Because the Supreme Court has made clear that it will
not remedy the unfair taxation of interstate telecommuters, Congress must take
action.
By making it too expensive for many Americans to telecommute, the “convenience
rule” discourages the practice. However, the nation cannot afford to deter distributed
work. This business strategy plays a crucial role in meeting a variety of pressing
national goals. These goals include:
* Assuring that government agencies and businesses can sustain operations during a flu pandemic, catastrophic storm, terror threat, or other
emergency;
* Reducing gas prices and our dependence on foreign oil;
* Reducing vehicular traffic, air pollution and transportation costs;
* Enabling older Americans to extend their working years and, thereby, deferring their dependence on the Social Security system and on
potentially under-funded pension funds;
* Strengthening the economies of our rural communities and reducing the financial incentives to ship American jobs offshore;
* Assuring compliance with P.L. 106-346, which requires the government to make telecommuting available to all eligible federal employees;
* Helping disabled Americans, including our war veterans, integrate into the mainstream workforce;
* Facilitating career continuity for frequently relocating military spouses;
* Helping Americans meet the competing demands of work and family; and
* Enabling the maximum number of Americans to exploit the power of the Internet.
Individual states must not be permitted to undermine the nation's capacity to use
interstate telecommuting to meet these and other essential national objectives.
Therefore, Congress must prohibit states from applying the “convenience rule.”
It must pass The Telecommuter Tax Fairness Act now.
Supporters of The Telecommuter Tax Fairness Act
CEO (202-266-0046) and Nicole Belson Goluboff, Esq., Member of the Advisory
Board (914-725-8099)
Shannon, Executive Director (678-916-4944)
The ITAC (The Telework Advisory Group for WorldatWork)
Advisory Board (732-329-2266)
Executive Director (703-883-9000 ext. 101)
