The New Jersey legislature passed a bill that would provide tax relief for New York-based companies expanding their offices in New Jersey, and legislation is on the horizon.
On the 30th of last month, the State Senate and the State House of Representatives each unanimously passed a bill that would provide tax credits to New Jersey-based companies with 25 or more full-time employees who set up offices in New Jersey for workers who live in New Jersey and are working remotely.
The bill is related to a dispute over state income tax jurisdiction between the New York and New Jersey governments that has emerged as more people work from home following the COVID-19 crisis. Under the tax law, New Jersey residents who commute to New York City pay taxes to New York State on income earned in New York, where they work.
The state of New Jersey also imposes an income tax but provides a tax credit for residents paying out-of-state taxes to avoid double taxation. However, in the case of telecommuting, it is the position that the New Jersey government should have the authority to collect taxes because the actual workplace is New Jersey. Meanwhile, New York State maintains that it will continue to impose income taxes on New Jersey residents who work from home.
In response, the New Jersey Legislature approved a bill to provide tax deductions for New Jersey-based employees when they set up a New Jersey office and relocate their workplace so that New Jersey-based employees can pay income tax in New Jersey.
A total of $35 million is allocated from the New Jersey state budget for this support. In addition, the bill also contains the purpose of responding to the Manhattan traffic congestion tax. The New Jersey legislators who introduced the bill are in the position that “if a New York-based company expands its office to New Jersey, New Jersey residents can escape the burden of traffic congestion tax, and the company can receive tax benefits.”