Reed Smith Client Alerts

New York employers and their employees should be following a new appeal working its way through New York’s tax appeals process. Edward Zelinsky, a well-known tax law professor, has filed petitions with the New York Division of Tax Appeals, renewing his two-decade-old battle with the State of New York over its “convenience of the employer” rule.1 The core issue in the appeal is the proper sourcing of income earned while working remotely for a New York-based employer, both during periods covered by mandatory office shutdowns and, more generally, in the modern working environment. The case could have widespread implications for the tax liability, and wage withholding, for non-New York resident employees who work remotely or on a hybrid basis and their New York employers.

Currently, Arkansas, Delaware, Nebraska, Pennsylvania, and (to a limited extent) Connecticut, also apply the convenience of the employer rule to determine the portion of wages subject to state personal income tax. The application of the rule has also been the subject of legislation and litigation, in other jurisdictions. For example, New Hampshire and Massachusetts’s recently petitioned the U.S. Supreme Court to intervene in their dispute over Massachusetts’ sourcing policy for remote workers, adopted on a temporary basis during the COVID-19 pandemic2 and New Jersey’s proposed legislation that seems intended to encourage New Jersey residents to challenge New York’s convenience of the employer rule.3 Other jurisdictions will also be watching this challenge to New York’s rule and taking note of whether the courts impose any limits on New York’s asserted ability to impose extraterritorial taxation. Thus, while New York-focused, this litigation will have nationwide impact.

Authors: Jennifer S. White Georgios I. Tsoflias Andrew M. Wagner


New York State imposes its personal income tax on all income earned by residents. Conversely, nonresidents are only subject to tax on their New York source income. A ratio of days worked in New York over total days worked is generally used compute the portion of wages to be treated as New York source income.4

The New York State Department of Taxation and Finance (the “Department”) has established a longstanding position, which has been sanctioned by New York courts,5 that for an employee whose assigned or primary office is in New York, any normal work day spent at a home office will be treated as a day worked outside the state only if the home office is a “bona fide employer office.”6 To be a bona fide employer office, the office must either (i) contain or be near specialized facilities, or meet an assortment of highly specific requirements related to the employee and employer’s use of and relationship to the work-from-home location.7 In practice, this threshold is extremely difficult to meet. On October 19, 2020, the Department issued guidance stating that, notwithstanding the impact of the COVID-19 pandemic, the convenience of the employer test would continue to apply.8

Professor Zelinsky has previously challenged the application of New York’s convenience of the employer rule without success.9 In petitions filed with the New York State Division of Tax Appeals, Professor Zelinsky once again asked for reconsideration of the state’s application of the rule. The issues raised in the petitions include the sourcing of income earned by Professor Zelinsky, a nonresident of New York, for days spent working for Yeshiva University’s Cardozo School of Law—a New York based law school—in 2019 and 2020. The petitions include a general challenge to the application of the rule in today’s modern work world, as well as a challenge to the imposition of the rule in light of mandatory government and employer work from home orders in place during the COVID-19 pandemic. A virtual hearing was held on April 24, 2023, during which Professor Zelinsky waived his right to privacy.