An NJBIA-supported bill that attempts to prevent New York from taxing New Jersey workers who have stopped commuting into New York City or other parts of the Empire State since the pandemic is heading to Gov. Phil Murphy’s desk.
Bill S-3128 (Lagana, D-38; Bramnick, D-21) easily received final passage in a Senate vote on Friday.
New Jersey residents currently pay income tax to their employer’s state and receive a credit from New Jersey so they’re not double-taxed on the state level.
But now, with so many more residents working remotely from their homes in New Jersey, instead of offices in New York, the Garden State wants those income tax dollars.
Essentially, the bill creates a “convenience of employer” test for residents of other states that offer a similar test. It also requires the state to establish its own convenience rule so New Jersey can tax workers at New Jersey-based companies who work from home in another state.
Additionally, it creates a tax credit for workers who pay income or wage taxes in another state.
“We have a lot of people that have not worked in Manhattan for a day in years and yet they’re paying all of their income taxes to New York State,” NJBIA Chief Government Affairs Officer Christopher Emigholz said. “And we’re not seeing any of that.
“There are estimates that it could be billions of dollars that New Jersey is losing out on. And that can go toward a lot of important things that we talk about in the scope of the budget process.”
The legislation would not affect New Jersey’s reciprocal tax agreement with Pennsylvania, under which compensation paid to Pennsylvania residents employed in New Jersey is not subject to New Jersey income tax.
Similarly, New Jersey residents employed in Pennsylvania are not subject to Pennsylvania income tax either – only New Jersey income tax. There is no such reciprocity agreement with New York.
