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Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.


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An Inside Look at Zelinsky Part II

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Edward Zelinsky, a Connecticut resident and professor at the Benjamin N. Cardozo School of Law in New York City, recently added another chapter to his New York tax chronicles, once again challenging New York’s convenience of the employer rule. Professor Zelinsky lost his previous battle with New York, Zelinsky v. Tax Appeals Tribunal, 1 N.Y.3d 85 (2003), cert. denied, 541 U.S. 1009 (2004), but this one has a bit of a different twist, as outlined in his 2019 and 2020 petitions for a hearing with the Division.

On Tuesday April 25, 2023, Professor Zelinsky presented his case before an Administrative Law Judge of the Division of Tax Appeals, and we got a first-hand look at what happened, but not because we were participating in the hearing. Instead, the ALJ presiding over the hearing allowed Zelinsky to invite other interested parties to watch, which usually never happens in these cases. But because he waived the secrecy right normally accompanying a tax appeal like this, the ALJ allowed it. So we popped some popcorn and listened in!

Here are the basics of the case: for portions of 2019 and 2020 Professor Zelinsky worked in New York City as a professor of law at the Cardozo Law School. However, at other times during these years he worked for the school from his home in Connecticut—the same circumstances in play in his old tax case. But this all changed during Covid when Professor Zelinsky worked remotely from his home in Connecticut from March 16th through the end of 2020, as ordered by Governor Cuomo’s executive order that closed schools in New York City, including Cardozo. Moreover, during this time in 2020, Professor Zelinsky did not set foot in New York and had no office or classroom available to him at the law school to perform his work responsibilities.

Enter the convenience of the employer rule, which we’ve covered at length in this space and in Tax Notes State, including this May 2021 article focusing specifically on Covid’s impact on the rule. As our readers know, the convenience of the employer rule treats wages a nonresident employee earns while working outside of New York State as New York taxable income if the employee works for a New York employer and is working outside of New York for the employee’s own convenience.

As presented at the hearing last month, Professor Zelinsky’s refund claims are based on two arguments: (1) under New York’s convenience of the employer rule, New York cannot tax his salary from the Cardozo Law School during the period in which he worked from his home in Connecticut while his office was closed in 2020; and (2) the convenience of the employer rule itself is unconstitutional anyway and should not be applied to the 2019 or 2020 tax years, regardless of Covid.

His first argument is grounded in the theory that he was not working outside of New York in 2020, beginning on March 16th, for his own convenience, but rather that he was working from his home in Connecticut due to the law school’s necessity. We think this argument has substantial merit, as Professor Zelinsky was obligated to work from his home in Connecticut because of Covid, the Governor’s executive order, and the fact that he had no office or classroom available to him at his place of employment to perform his work duties. Indeed, if Professor Zelinsky had no place to work in New York precisely because the Governor of New York wouldn’t let him, it seems incongruous to suggest that he was working from home for his own convenience.

But the professor is taking a broader shot at the convenience rule itself, again on constitutional law grounds. He contends that the Due Process Clause prohibits New York from taxing a nonresident on income earned beyond the state’s borders and that the dormant Commerce Clause requires New York to fairly apportion interstate income among the states. In doing so, he argues that New York’s taxation of the income he earned while working in Connecticut in 2019 and 2020, through application of the state’s convenience of the employer rule, is a violation of these constitutional principles. Of course, there is what Professor Zelinsky referred to as the “elephant in the room” during the hearing, which is that New York’s highest court already rejected these arguments back in 2003 in a case bearing his name. But his argument is that the underpinnings of the 2003 decision have been eroded, with the onset (and really the explosion) of remote work, and that the principles enunciated by the dissenting opinion in a similar 2005 case (Matter of Huckaby v. New York State Division of Tax Appeals, 4 N.Y.3d 427 (2005)) should now be the law of the land. One clever observation he made in support: he was able to hold the entire hearing on Webex, with all participants able to join in from around the state and country, something that would’ve been unthinkable back when his prior case was litigated in the early 2000s. 

We won’t know how this gets resolved until at least early 2024. Our firm also has a number of Covid-related convenience rule matters in the hopper as well, so perhaps there will be interesting updates courtesy of us as well!  So, stay tuned for future updates. 

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