Work from home in N.J., pay taxes in NYC: Oroho says it’s time for Murphy to make stand

New York, citing ‘convenience of employer,’ is costing state billions in revenue, he says

While much has been made of a proposed congestion tax against New Jersey drivers in Midtown Manhattan — and a potential countertax against out-of-state drivers in New Jersey — state Sen. Steve Oroho said more attention needs to be paid to an actual tax that is costing the state billions of dollars.

On Monday, Oroho (R-Sparta) called on Gov. Phil Murphy to stop giving in without a fight to New York tax officials who are stepping up enforcement to grab income tax payments from New Jersey residents who no longer work in the city.

Oroho, the Senate Republican budget officer, calls it an unjust tax against workers who now work from home — and didn’t set foot in New York City for most of 2020.

“It’s shocking to watch as Gov. Murphy continues to sit silent while a horde of tax officials in Albany are issuing billions of dollars of tax bills to New Jersey residents for income earned here in the Garden State during the pandemic,” he said.

Oroho said the “convenience of employer” rule that New York is using does not apply.

Most states source compensation based on the location where the services are performed. Under this approach, an employee’s income earned by working from home outside of the state in which the employee normally works would not be subject to income tax in the work state, because the services are no longer performed there.

New York recently updated its “convenience of employer” rule to say the income of an employee who works remotely for the employee’s convenience rather than the employer’s necessity remains sourced to the state where the employer is located.

Oroho said the justification is not sound.

“The ‘convenience of the employer’ rule that New York is using to stake its claim clearly shouldn’t apply if offices were closed due to the pandemic and workers had no choice but to work from home in New Jersey,” he said. “If there ever was a time to fight back against New York’s unfair taxation of New Jerseyans, it’s now.”

Oroho, who urged the state to file an amicus brief to a similar case involving New Hampshire residents working in Boston, said Murphy needs to do more in this fight.

Murphy spokesperson Darryl Isherwood said the administration is taking action.

“If Sen. Oroho is in fact ‘leading the charge’ on this issue, then he should know that, in December, Attorney General (Gurbir) Grewal filed an amicus brief in support of New Hampshire, which is suing Massachusetts on this issue,” he said. “Fair taxation will be decided in the Supreme Court, not through posturing by Sen. Oroho, who can hardly claim to be a champion for New Jersey taxpayers after supporting President (Donald) Trump and his four-year assault on the middle class and voting against a middle-class tax rebate here in New Jersey.

“Our position is very clear: Another state taxing those residents who previously commuted to their jobs, but have worked from home throughout the pandemic, is unfair and should be stopped. We look forward to a decision from the Court.”

Less than two weeks ago, Oroho partnered with U.S. Rep. Josh Gottheimer (D-5th Dist.) on a letter to U.S. Treasury Secretary Janet Yellen and Internal Revenue Service Commissioner Charles Rettig urging federal guidance to address the concerns of more than a dozen states regarding what they called the unconstitutional extraterritorial assertions of taxing power by states like New York and Massachusetts.

Additionally, Oroho and state Senate Budget Chairman Paul Sarlo (D-Wood-Ridge) have sponsored legislation requiring Treasurer Liz Muoio to examine New York’s taxation of New Jersey residents’ income. The bill, S3064, passed the Senate in October and is pending consideration in the General Assembly.

“Gov. Murphy needs to stop rolling over for New York,” Oroho said. “He hasn’t done nearly enough while his friend, (New York) Gov. (Andrew) Cuomo, steals more than $1 billion from New Jersey and billions more from our taxpayers who pay higher income tax rates to New York. He needs to do more to defend New Jersey and its residents.”