Bill Shielding Remote Workers from Double Taxation Approved

The Connecticut General Assembly has approved fast-track legislation shielding more than 100,000 residents from double taxation.

The state Senate approved HB 6516 March 1 on a bipartisan 28-7 vote after the bill earlier cleared the state House 125-24.

The bill is now on its way to Governor Lamont for his signature. 

Section 1 of the emergency certified bill shields residents who formerly commuted to an out-of state job from paying income tax to both Connecticut and state where they are employed. 

Changes in commuting behavior as a result of the pandemic necessitated the bill.

Clarity

Section 1 provides some clarity on state income tax liability for those residents employed in other states who are now working remotely.

Formerly, Connecticut residents working in Massachusetts, New York, or elsewhere paid income taxes in the state of their employer.

This is commonly referred to as the “convenience of the employer” rule.

Remote workers receive credit for their out-of-state liability against any corresponding liability in Connecticut. 

These workers then receive credit for this out-of-state liability against any corresponding liability in their home state of Connecticut. 

The wide-scale adoption of telecommuting policies resulted in a significant shift in commuting behavior and some uncertainty regarding the convenience rule.

HB 6516 allows those commuters turned telecommuters to continue to pay income tax in the state of their employer for the 2020 tax year and receive a corresponding deduction on their Connecticut tax liability. 

Temporary Fix

The bill is a temporary fix to questions regarding tax liability.

If employees continue to work from home through the duration of the 2021 tax year and are no longer crossing state lines, can the neighboring state still tax them on their income?  

This and other related questions are already the subject of a pending legal action in the U.S. Supreme Court—where Connecticut, along with 17 other states, are arguing that those employees would need to start paying their income tax in Connecticut.

The bill is a temporary fix to questions regarding tax liability.

New York, on the other hand, believes they should continue to pay taxes in New York if their employer remains in New York.      

Should Connecticut’s side prevail, it could mean hundreds of millions in new revenue rolling into the state each year.

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For more information, contact CBIA’s Eric Gjede (860.244.1931) | @egjede