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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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Showing 154 posts by Timothy P. Noonan.
COVID and New York’s Convenience Rule: Litigation Update
As our regular readers know (all 7 of them), one of the bigger SALT issues to come out of COVID, especially in New York, relates to New York’s “Convenience of the Employer” rule. Under that rule, wages that a nonresident employee earns while working outside of New York State are treated as New York-sourced income if the employee is working from home for their New York employer for their own convenience. As we reported back in October 2020, several months into the pandemic the New York Tax Department announced its position that COVID-related telecommuting would have no impact on its application of the convenience rule. And as we experienced in a number of personal income tax audits after that, the Tax Department extended this position even to situations where an employer had closed its office in New York.
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The Proposed New York Corp Tax Regs Are Out! And A First Look at the New Passive Investment Customer Rules
We’re seeing some progress in New York! It’s been nine long years since the Legislature adopted sweeping corporate tax reform, and today the New York Department officially released its proposed rulemaking (as opposed to the draft version of the rules that were kicking around for the last few years). Under New York rulemaking procedures, a mandatory 60-day comment period has commenced. During this time the public may submit comments to the Department on the proposal. After the comment period, the Department is permitted to adopt the proposed rules.
Fact-Free Residency Case at Tax Appeals Tribunal?
A few weeks ago, the Tax Appeals Tribunal issued a decision in a residency case, Matter of Glynn, holding that the Administrative Law Judge’s grant of summary determination was properly granted to the Division of Taxation. This is somewhat unusual for a residency case, as more extensive fact finding is usually necessary to resolve these disputes. And our fellow blogger at Taxes in New York (“TiNY”) had a lot to say about this opinion. A few other thoughts from this corner………
Changes to the MCTMT and Limited Partner Taxation in New York
Last month, New York State passed its 2023-24 Budget, better late than never. We highlighted a lot of the new provisions in a recent Tax Alert, but there are a couple of changes involving the Metropolitan Commuter Transportation Mobility Tax (the “MCTMT”) worthy of special note. The MCTMT functions somewhat like a payroll tax on employers in the Metropolitan Commuter Transportation District (which includes the counties of New York, Bronx, Kings, Queens, Richmond, Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester). And it also applies to self-employed individuals, including partners in partnerships.
An Inside Look at Zelinsky Part II
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.
Washington State Capital Gains Tax Upheld by State Supreme Court as Constitutional
In an unfortunate blow to Taxpayers, the Washington State Supreme Court ruled 7-2 on Friday, March 24, 2023, to uphold the constitutionality of the state’s capital gains tax. The ruling comes as a sharp reversal of a lower court decision striking down the tax as unconstitutional, which we reported on here.
Obus is over. So What’s Next?
Last month, New York’s highest court denied leave to appeal in Matter of Obus v. New York State Tax Appeals Trib., 206 A.D.3d 1511 (3d Dep’t. 2022), closing the book on litigation that will have lasting implications on New York’s ability to tax vacation-home owners, and perhaps others with tenuous connections to a New York dwelling, as tax “residents” of New York. The New York Court of Appeals’ refusal to hear the appeal leaves the lower court’s decision in Obus intact.
Another Win for Telecommuters! Missouri Judge Holds St. Louis Improperly Applied Tax to Remote Workers
Another win for telecommuters! Yes, you read that right! We recently covered a case involving a Pennsylvania-based employee who won a Covid-related telecommuting case in Ohio. Now remote employees have another win to add to their pile of Covid-related telecommuting cases. In Missouri, a judge just ruled that St. Louis improperly applied its 1% earnings tax on nonresident employees who worked outside the city during the Covid-19 pandemic.
A Blue Wave of High Tax Rates?
As residents and SALT practitioners in New York, we see firsthand how high income tax rates drive the personal decision making of taxpayers as well as enforcement efforts by tax departments. On the taxpayer side, we’ve seen tangible (albeit anecdotal) evidence that taxpayers will make decisions on where to work or live based on their taxes. We saw this in 2018 with the explosion of moves following the implementation of the SALT cap, and again in New York in 2021 when, combined with Covid, taxpayers exited New York at a record-breaking pace, coincidentally around the time that the New York legislature raised the highest combined tax rate for New York State and City resident taxpayers to 14.7%. Of course, over the years New York has become somewhat of a leader in personal income tax enforcement, particularly in the residency area, to address the movement of taxpayers both in and out of the state. For example, over the course of 2018 through 2022, the tax department reports performing over four thousand residency audits per year. More recently, the tax department has put in place a massive “desk audit” program specifically to have a process that immediately questions taxpayers who left the state in 2020 or 2021.
NYC PTET Update: Election Forms Now Available!
The New York City Pass-Through Entity Tax (“NYC PTET”) online application is now available, allowing individuals eligible to opt in to the NYC PTET on behalf of an eligible city partnership or eligible city resident S corporation.
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