Sununu says NH could sue Mass over tax rule

Gov. Chris Sununu urged residents and lawyers to oppose an emergency rule subjecting the Massachusetts income tax on all time New Hampshire employees work from home for Bay State companies due to COVID-19.

CONCORD – The state of New Hampshire and individual taxpayers can sue if Massachusetts fails to repeal a new rule imposing its 5% income tax on all the time that New Hampshire residents spend working from home due to COVID-19, according to Gov. Chris Sununu.

This response raises the political stakes for a public hearing Massachusetts officials will be hosting remotely on this rule next Thursday morning.

Attorney General Gordon J. MacDonald. along with Business and Economic Affairs Commissioner Taylor Caswell. wrote Massachusetts Department of Revenue officials last Friday, objecting to this tax treatment being applied to New Hampshire residents since last March.

“Hopefully Massachusetts will choose to do the right thing and abandon this idea but if not, we have other options to address this,” Sununu said.

The governor released a letter he sent to Mass. Gov. Charlie Baker that the new rule raises “serious legal and policy concerns.”

“It is my hope that this matter can be resolved promptly and in a manner that removes any necessity for New Hampshire to consider legal remedies,” Sununu wrote.

A few days later, Sununu said he had received complaints about it on his own and he ordered a comprehensive review of the policy.

The Massachusetts Department of Revenue is holding this hearing over whether to make this emergency tax rule apply through Dec. 31 or 30 days after the COVID-19 state of emergency is lifted in that state.

NH residents urged to send comments

Sununu said urged state residents and their lawyers to send in written comments against the rule to rulesandregs@dor.state.ma.us.

“I think there will be enough push and that our voices will be heard,” Sununu said.

Prior to the pandemic, New Hampshire residents working for a Massachusetts-based company only paid income taxes based on the number of days they worked in that state.

So if someone worked 240 days a year for a firm but spent only 80 days at that Massachusetts business, then a third of the worker’s income was subject to the income tax.

This new rule makes all their income subject to the tax even if the employee doesn’t ever report in person on the job.

In his legal brief, AG MacDonald called the tax rule “unfair, unexpected, retrospective, and extraterritorial” and added it would trample on the state’s sovereign jurisdiction.

MacDonald also said the policy threatens the interstate cooperation the two states have enjoyed to protect their citizens during this pandemic.

“This sudden reversal of policy fails to respect the important governmental interests of a neighboring sovereign,” MacDonald wrote.

Would harm ‘NH advantage’

Commissioner Caswell said political leaders from both major parties have for half a century blocked attempts to adopt an income tax here and this “New Hampshire advantage” remains a major incentive for businesses to locate and expand here.

“In sum, this proposed rule not only will have substantial regional economic impact, but it is a direct counter to tax laws and the resulting economic advantages that have long been the chosen policy in New Hampshire,” Caswell said.

“The fact that it attempts to accomplish this substantial change during a time of economic crisis is particularly troublesome.”

Caswell noted under this treatment, a New Hampshire worker of a Massachusetts-based company residing in a condo in Vermont would have to pay income taxes to both those states.

MacDonald said that amounts to double taxation.

In his brief, MacDonald said his office continues to research the matter but that both individual employees and the state could have grounds to sue.

The policy for these workers could violate provisions of the Due Process and Commerce Clauses of the U.S. Constitution, MacDonald added.

Sununu bristled at a reporter who questioned if the governor had been “muted” in acting against this policy.

“I completely reject the idea that the response has been muted,” Sununu said.

Later he added, “I called Charlie Baker directly; it’s a fairly complicated issue. There isn’t a day that’s gone by that we haven’t worked on this. We have an entire team working on this issue.”

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