Blank Rome LLP

Last October, New Hampshire filed a challenge with the U.S. Supreme Court condemning Massachusetts’s temporary rule requiring nonresident employees of Massachusetts’s employers to continue sourcing income to Massachusetts, even if the employees were no longer working in the state. New Hampshire v. Massachusetts, No. 22O154 (filed Oct. 19, 2020). In January, the Supreme Court invited the Acting Solicitor General (“Solicitor General”) to file an amicus brief on behalf of the United States.

On May 25, 2021, the Solicitor General filed its amicus brief. Brief for the United States as Amicus Curiae, New Hampshire v. Massachusetts, No. 22O154 (filed May 25, 2021). While there are valid arguments for the Supreme Court to grant original jurisdiction[1] as well as valid arguments against, the Solicitor General’s brief ventures into the absurd.

The Solicitor General posits that the Supreme Court should deny New Hampshire’s motion. Id. at p. 1. The brief lays out numerous logical arguments in support of denial. And then things turn a bit ridiculous. For example, the Solicitor General suggests that Massachusetts may be able to constitutionally tax “a New Hampshire resident who exclusively works [remotely from New Hampshire] on computers and servers located in Massachusetts, collaborates with a team of colleagues based in Massachusetts, and conducts transactions that occur in and are regulated by Massachusetts.” Id. at p. 18. Having colleagues and using computer equipment located in Massachusetts is a tenuous connection at best and certainly insufficient for the state to subject the employee to tax.

Similarly, the Solicitor General opines that “[a] telecommuting employee’s physical location thus need not map precisely onto the location of the governmental services needed to support that employee’s work.” Id. at 21. However, this statement is fundamentally wrong.

The standard is whether the services provided by the state are fairly related to the tax imposed. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977). Thus, the state must actually provide services to the nonresident employee—providing services to the employee’s colleague is insufficient. Reducing the standard so drastically as to allow Massachusetts to tax 100 percent of an employee’s income simply because that employee virtually works with colleagues located in Massachusetts or because there is a computer server in the state would render the “fairly related” requirement meaningless. Id.

While some states may like the ability to tax one and all, that is not the standard. The Solicitor General’s tangential statements have no basis in the law and should be viewed as nothing more than grasping at straws. The Solicitor General’s response highlights the need for mobile workforce legislation at the federal level.

[1] Original jurisdiction is the jurisdiction granted to the Supreme Court to try certain disputes, including disputes between two states, without any other court’s prior review. U.S. Const. art. III, § 2.