The Connecticut House of Representatives has passed a bill designed to protect remote workers from double taxation during the COVID-19 pandemic.
H.B. 6516 passed the House February 24 after being introduced the same day by House Speaker Matthew Ritter (D), House Majority Leader Jason Rojas (D), Senate President Pro Tempore Martin Looney (D), and Senate Majority Leader Bob Duff (D). The bill has been sent to the Senate, where a similar bill (Raised S.B. 873) has been introduced.
H.B. 6516's passage was cheered by Gov. Ned Lamont (D), who called it “a great step forward toward tax fairness in our state.”
“Thousands of residents had to suddenly begin working remotely out of necessity, telecommuting for their personal safety and that of their loved ones, and they should be protected against paying a penny in extra taxes last year as a result,” the governor said.
The bill's remote worker provisions would apply for the 2020 tax year. It would allow Connecticut residents who paid income tax to another state with a convenience of the employer rule in place to obtain an income tax credit for the amount paid to the other state.
The neighboring state of New York has a convenience of the employer rule, which requires a nonresident taxpayer’s income to be sourced to the employee’s physical location while working remotely by necessity and to be sourced to the employer’s location if the employee is working remotely for their convenience.
Connecticut adopted its own convenience of the employer rule in 2018 in response to New York’s rule, which applies only if the taxpayer’s state of residence has a similar rule.
H.B. 6516 would also provide a credit to residents who have paid income tax to another state that has a law or rule requiring nonresident employees to pay nonresident income tax on income earned while working remotely during the COVID-19 pandemic if the employee was working in that other state before March 11, 2020.
Massachusetts adopted a regulation in October 2020 allowing it to source and tax the income of nonresident workers who would normally work in Massachusetts but are telecommuting because of the pandemic. New Hampshire — which has no income tax — has sued Massachusetts over the regulation, and Connecticut was among four states that filed an amicus brief in support of New Hampshire urging the U.S. Supreme Court to hear the case.
According to the bill’s fiscal note, Connecticut residents would owe about $300 million in additional personal income tax payments for the 2020 income year if the credit isn’t provided. However, Rep. Sean Scanlon (D) said the bill won't have a fiscal impact because it is not money the state was expecting to collect to begin with.
The bill's third remote worker provision would prevent the Department of Revenue Services from considering employees who worked remotely during the tax year solely because of the COVID-19 pandemic for purposes of determining whether an employer has nexus with the state.
The bill also contains changes to the state’s payment in lieu of taxes program and a provision preventing the state from recovering cash and medical assistance from liens on real property unless the state is required to by federal law.
During the February 24 House floor session, Scanlon, co-chair of the Finance, Revenue, and Bonding Committee, said H.B. 6516 would affect about 110,000 residents who commute to New York and Massachusetts.