The Supreme Court Denies Complaint in New Hampshire v. Massachusetts, Heightening the Importance of Individual Refund Claims

Client Alert
June 29, 2021

Yesterday the United States Supreme Court ("Supreme Court") denied New Hampshire’s bid to strike down as unconstitutional the Massachusetts regulation[1] that governs personal income taxation for nonresidents who have been telecommuting since the start of the COVID-19 pandemic.[2] While easing the tax compliance burdens for some employers, the Massachusetts regulation imposes Massachusetts personal income tax on New Hampshire residents who began working remotely from home for Massachusetts-based employers, despite their not having set foot in Massachusetts since the start of the pandemic. The central issue in the case, according to New Hampshire, would have been whether "Massachusetts may tax New Hampshire residents for work performed entirely within New Hampshire simply because those individuals once commuted to Massachusetts for work."[3]

In denying New Hampshire’s complaint, the Supreme Court likely relied on the arguments presented by the Acting Solicitor General in her amicus curiae brief submitted on May 25, 2021. The Solicitor General noted, among other reasons, that the issues New Hampshire sought to raise could be "adequately raised and litigated" by New Hampshire residents. Furthermore, any constitutional claims

would more appropriately be considered on developed factual records concerning affected individuals and with the benefit of authoritative interpretations of the relevant tax provisions by Massachusetts courts.[4]

As the Solicitor General’s brief suggests, the Supreme Court’s dismissal of New Hampshire’s suit is not necessarily the end of the road for nonresident employees affected by the Massachusetts regulation.  As we highlighted in our recent Tax Notes State article, "Work Remotely, Pay Tax . . . Locally? Saying No to Massachusetts" [here], nonresident employees may press forward with personal income tax refund claims by following the “established administrative and judicial remedies” that Massachusetts invited them to follow in its brief opposing New Hampshire’s complaint.[5]  In making refund claims, affected nonresident employees should be prepared to challenge the regulation as it applies specifically to them.[6]

Please contact Dave Nagle, Caroline Kupiec, or another member of Sullivan’s Tax Department to discuss potential refund claims.

[1] "Massachusetts Source Income of Non-Residents Telecommuting Due to the COVID-19 Pandemic" 830 Mass. Code. Regs. 62.5A.3 (as most recently proposed Dec. 8, 2020).  

[2] Order List, 594 U.S. 2 (June 28, 2021) (Order: 154, Orig.). 

[3] Reply Brief in Support of Motion for Leave to File Bill of Complaint, 3, New Hampshire v. Massachusetts (Dec. 22, 2020). 

[4] Brief for the United States as Amicus Curiae, 4, New Hampshire v. Massachusetts (May 25, 2021).  

[5] Brief in Opposition to Motion for Leave to File Complaint, 22, New Hampshire v. Massachusetts (Dec. 11, 2020). 

[6] While nonresidents could pursue a declaratory judgment action in Massachusetts Superior Court, they would likely face the Massachusetts Department of Revenue’s response that they have not exhausted their administrative remedies. DOR may also attempt to parry any facial challenge to the regulation, arguing that taxpayers have varying degrees of contact with the Commonwealth.

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