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Lagana Bill to Establish New Jersey Version of ‘Convenience of Employee’ Rule Clears Senate


Trenton – Bipartisan legislation sponsored by Senator Joe Lagana and Senator Jon Bramnick that would create a “convenience of the employer” test for residents of states, such as New York, which impose a similar test, was released by the full Senate. The bill would require New Jersey to adopt its own “convenience of the employer” rule, so it could tax employees of New Jersey companies who choose to work as a matter or convenience from their homes in other states.

“New York state’s ‘convenience of the employer’ rule unfairly targets New Jersey residents and uses their tax dollars to help prop up New York’s programs and operations. This legislation seeks to even the playing field, by applying a similar sourcing rule for nonresidents who are rendering personal services for an employer located in this state,” said Senator Lagana (D-Bergen).

Under the New York rule if an employee works from home for their own convenience, rather than as a requirement set by the employer, those days are treated as days worked in their office.

At least five other states have the same interpretation as New York, including Pennsylvania. However, New Jersey and Pennsylvania have a reciprocal tax agreement in which people pay income taxes where they live, and not where they work.

The new legislation would also establish other means, such as tax credits for those who pay any income tax or wage tax imposed for the taxable year by another state, by which New Jersey workers might recoup some of their earned income.

In addition, the bill would also establish a pilot program to be administered by the New Jersey Economic Development Authority, through which the authority would provide grants to businesses to assign their New Jersey resident employees to New Jersey locations.

The bill, S-3128, was released on a vote of 37-0.