Massachusetts Source Income of Non-Residents Telecommuting due to COVID-19 (EMERGENCY REGULATION)
DATE: 04/21/2020
(1) Scope of Regulation; Background; Outline of Topics; Effective Date
(a) Scope of Regulation. 830 CMR 62.5A.3 sets forth the sourcing rules that apply to income earned by a non-resident employee who telecommutes on behalf of an in-state business from a location outside the state due to the COVID-19 state of emergency in Massachusetts.
(b) Background. In response to the COVID-19 pandemic, Massachusetts and other states have declared states of emergency and issued temporary social-distancing measures and other restrictions. Consequently, many businesses have implemented mandatory telecommuting requirements for their employees. In general, income of a non-resident derived from a trade or business, including employment, carried on in the commonwealth is sourced to Massachusetts for personal income tax purposes. See M.G.L. c. 62, § 5A(a). 830 CMR 62.5A.3 sets forth an application of this general rule for the duration of the COVID-19 state of emergency in Massachusetts, and explains the parallel treatment that will be accorded to resident employees with income tax liabilities in other states that have adopted similar sourcing rules.
(c) Outline of Topics. 830 CMR 62.5A.3 is organized as follows:
1. Scope of Regulation; Background; Outline of Topics; Effective Date
2. Definitions
3. Massachusetts Source Income for Non-Residents Telecommuting due to the COVID-19 State of Emergency in Massachusetts
4. Sourcing Rules in Other States
(d) Effective Date. 830 CMR 62.5A.3 is effective for the period beginning March 10, 2020 and ending on the date on which the Governor gives notice that the state of emergency declared in Executive Order 591 is no longer in effect.
(2) Definitions
Unless the context requires otherwise, for the purposes of 830 CMR 62.5A.3, the following definitions apply:
COVID-19 State of Emergency, a state of emergency declared by a state in response to the 2019 novel Coronavirus pandemic.
Non-Resident, any natural person who is not a Massachusetts resident.
Resident, any natural person domiciled in Massachusetts or any natural person who is not domiciled in Massachusetts but who maintains a permanent place of abode in Massachusetts and spends in the aggregate more than 183 days of the tax year in Massachusetts, including days spent partially in and partially out of Massachusetts.
(3) Massachusetts Source Income for Non-Residents Telecommuting due to the COVID-19 State of Emergency in Massachusetts
Under M.G.L. c. 62, § 5A(a), income of a non-resident derived from a trade or business, including any employment, carried on in the commonwealth is sourced to Massachusetts. Pursuant to this rule, all compensation received for personal services performed by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency, was an employee engaged in performing such services in Massachusetts, and who during such emergency is performing such services from a location outside Massachusetts due solely to the Massachusetts COVID-19 state of emergency, will continue to be treated as Massachusetts source income subject to personal income tax under M.G.L. c. 62, § 5A and personal income tax withholding pursuant to M.G.L. c. 62B, § 2.
(4) Sourcing Rules in Other States
Other states have adopted or may adopt sourcing rules similar to the rule in 830 CMR 62.5A.3(3). A resident employee suddenly working in Massachusetts due to the COVID-19 pandemic who continues to incur an income tax liability in another state due to that state's sourcing rule will be eligible for a credit for taxes paid to that other state under M.G.L. c. 62, § 6(a). In addition, the employer of such employee is not obligated to withhold Massachusetts income tax to the extent the employer remains required to withhold income tax with respect to the employee in such other state.
Regulatory Authority:
830 CMR 62.5A.3: M.G.L. c. 14, § 6(l); M.G.L. c. 62C, § 3
Date of Promulgation: April 21, 2020