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When New Haven, Conn., resident Edward A. Zelinsky argues his tax case Oct. 9 before a bank of five appellate judges in Albany, N.Y., he’ll have heavy-duty backup. Eugene Gavin, commissioner of the Connecticut Department of Revenue Services, along with state Attorney General Richard Blumenthal, have just filed an amicus curiae brief in Zelinsky’s telecommuter tax case. It backs Zelinsky’s position that New York violates the U.S. Constitution by refusing to attribute income to the state where the work occurred. A tax professor at New York’s Benjamin N. Cardozo School of Law, Zelinsky is relying on the federal constitution’s equal protection and commerce clauses. He regularly works from his Connecticut home office, and, since 1994, he has declared to New York tax collectors that he owes Connecticut tax for days he stayed home. Before 1991, when Connecticut had no state income tax, this was less controversial. It is now, because it can cause double-taxation. New York ascribes income to the employer’s state, and Connecticut taxes income where it was earned. Of the 41 states with income taxes, 37 allow apportionment based on where the income was earned. Most, like Connecticut, give a credit for income taxes paid to another state. New York doesn’t do this unless the New York employer required the employee to work out of state. If the work could have been performed in New York, it is taxed to New York. In his brief supporting Zelinsky’s position, DRS Commissioner Gavin contends that the only constitutionally proper question is whether the services were performed out-of-state: “If they were, the income derived from their performance cannot be subject to the New York income tax.” NOT JUST THEORY With DRS staff lawyer Stacey Pavano, Gavin co-authored “The Long Arm of the Empire State; Convenience Rule Discourages Interstate Telecommuting,” for the March/April issue of the Journal of Multistate Taxation and Incentives. In addition, Gavin has encouraged the practice of telecommuting, with more than 10 percent of DRS’ 850 employees currently working from home offices via telephone, fax and computers. The case dates from 1994, when Zelinsky made it clear in filings with New York taxing authorities that he and his wife believed they only owed income tax to Connecticut for those days he worked from home. New York countered with a payment demand, and Zelinsky said he decided, “Let the battle begin.” So far, Zelinsky has lost in three rounds of mediation, an administrative hearing and the quasi-judicial tax appeals board. All echoed the current New York position. The appeals board ruled that, constitutionally, the policy does not interfere with the constitutional guarantees favoring interstate commerce or equal protection under the laws. The upcoming argument in October before the New York Supreme Court Appellate Division will be the first time his case is considered by judges. Gavin and Blumenthal have prevailed in clashes with New York over taxing authority. Said Gavin in an interview, “This is a classic constitutional due process issue, where Connecticut has been successful under the leadership of the AG in the past.” He added that his counterpart in New York, Arthur Roth, has said it’s a $100 million annual revenue matter. Conversely, said Gavin, “the attorney general and I simply want to protect the people of Connecticut to make sure they’re not double taxed. Gavin has been advocating a change in New York’s policy for the last decade, and doesn’t expect change to come easily: “I think we’re going to win, but I think it’s going to take going all the way up to the U.S. Supreme Court to do it.” CHANGING TIMES In his brief, Zelinsky quotes Gavin’s article for the fact that only three other states use New York’s so-called “convenience of the employer rule.” In recent years, New York’s policy has been challenged by other employees working in Connecticut, and as far away as Maine and Tennessee. “I don’t think it’s a surprise that more and more cases like this are coming up,” said Zelinsky in an interview. When people with New York employers elect to work many states away, he added, the matter becomes national in scope, he said, “given New York’s very aggressive policy.”

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