The New York Supreme Court, Appellate Division, Third Department, held oral arguments in tax law professor Edward Zelinsky’s challenge of New York’s “convenience of the employer” rule. Specifically, Prof. Zelinsky is asserting that New York improperly sourced his employment income to New York during the COVID-19 pandemic when the government forced Cardozo to close and move to remote work, which led him to work entirely from his home in Connecticut.

More coverage and detail below the fold.

Law360: NY Panel Probes Professor’s Challenge Of Remote Tax Bill

Zelinsky, who is representing himself, responded that “the necessity was in fact both,” because former Gov. Andrew Cuomo ordered school facilities to be shut down under a public health law and he and the university had to comply or face stiff financial penalties.

“If I hadn’t taught on Zoom from home, Cardozo was out of business. Employer necessity gets no stronger than this,” Zelinsky said just before Justice Corcoran’s question.

Zelinsky appealed a state Tax Appeals Tribunal upholding the tax on days he worked from home during the pandemic in 2020 and before the pandemic in 2019, although most of Monday’s arguments focused on the 2020 tax year. He raised constitutional challenges against the tax for both years but argued that New York’s taxation of him in 2020 was a particularly “egregious” overreach of the state’s taxing powers.

“There has never been more extraterritorial taxation than a state sending a tax bill over the very New York-Connecticut border that I was forbidden to cross in the other direction,” Zelinsky said.

…

Zelinsky replied that Cuomo’s order required Cardozo to have its employers use telecommuting or work-from-home capabilities as a public safety measure.

“There was nothing voluntary during the pandemic,” he said.

…

Justice Christine M. Clark, though, pushed back on that argument, saying Cardozo had to be shut down for in-person activities.

“Doesn’t it just seem a little arbitrary or irrational during the pandemic when everyone was told to stay at home that you wouldn’t go to your home to work during that period of time?” Justice Clark asked.

Bloomberg Law: NY Judges Question Viability of Tax on Remote Work in Modern Age

New York courts have been deferential to the state’s interpretation of its ability to tax income, tax attorneys said. But the pandemic raised new questions as to whether the tax rule makes sense in an era of Zoom meetings and hybrid work. Connecticut and New Jersey officials have encouraged residents to challenge their tax bills in the hopes of overturning the convenience of employer rule, though litigators said the case likely would have to reach the US Supreme Court for that kind of change to occur.

Justice Justin O. Corcoran voiced skepticism over the “future viability of the convenience-of-employer test given the changes in the remote work environment.”

…

“I’m not Elon Musk. I was sent home. My home is in Connecticut,” Zelinsky said. “That is a simple reality that New York State doesn’t want to admit.”

Tax Notes: New York’s Employer Convenience Rule Tested in Remote Tax Suit

During June 1 oral arguments in Zelinsky v. Tax Appeals Tribunal at the New York Supreme Court, Appellate Division, Third Judicial Department, judges asked whether a state order requiring nonessential employees to work remotely during the pandemic created a public necessity or an employer necessity. One judge suggested it would seem “arbitrary or irrational” for employees during the pandemic — when employees were ordered to stay home — not to go home to work.

…

Sutton further argued that Zelinsky v. Tax Tribunal (Zelinsky I) — a 2003 case in which Zelinsky was denied a refund for income earned while working remotely in 1995 and 1996 — was controlling and that modern remote-work arrangements strengthen, rather than weaken, New York’s position in the current case.

…

Zelinsky responded that the state was trying to extend the economic nexus principles of South Dakota v. Wayfair Inc. beyond their limits.

“Geography still matters. Wayfair is a very limited case,” Zelinsky said.

Zelinsky also said the current case is different than Zelinsky I because the administrative record now establishes that his scholarship activities performed in Connecticut were a significant and compensated part of his employment.

“The reality is, for the COVID period, I was kept out of New York. The reality is, for the pre-COVID period, a majority of my work period was in Connecticut, but New York taxes 100 percent,” Zelinsky said.

In Zelinsky v. Tax Appeals Tribunal (No. CV-25-1156) Zelinsky represented himself.

More importantly, oral arguments were conducted on the day in which Ed & Doris celebrated their 55th wedding anniversary, so congratulations on that milestone!