SG Tells Justices To Pass On NH v. Mass. Remote Tax Case

By Maria Koklanaris
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Law360 (May 26, 2021, 11:24 AM EDT) -- New Hampshire's complaint against Massachusetts' regulation imposing income tax on remote workers during the COVID-19 pandemic does not merit the U.S. Supreme Court's original jurisdiction, the acting solicitor general told the justices in a brief.

About New Hampshire's dispute with Massachusetts over its taxing of remote workers, acting Solicitor General Elizabeth B. Prelogar wrote in a brief to the U.S. Supreme Court that alternate forums are ample and any presentation of harm should be made by affected individuals. (AP Photo/Alex Brandon)

The justices in January had sought the opinion of the United States before deciding whether to hear, as a matter of original jurisdiction, the complaint of one state against another. In a brief filed Tuesday night, acting Solicitor General Elizabeth B. Prelogar responded that the court had found repeatedly that original jurisdiction should "be exercised only 'sparingly,'" and the harms New Hampshire complains of do not meet that standard.

She added that court precedent does not support New Hampshire's claim that the justices do not have discretion over whether to take a case under original jurisdiction.

"New Hampshire and several amici invite this court to reconsider its well-established conclusion — reaffirmed a number of times over more than 40 years — that the exercise of original jurisdiction in controversies between states is discretionary," Prelogar wrote.

"The court has recently declined similar invitations and opportunities," she added, citing four cases.

Meanwhile, alternate forums are ample, the acting solicitor general said, and if there is to be a presentation of harm, it should be made by affected individuals, not by the state on their behalf.

"The issues New Hampshire seeks to present can adequately be raised and litigated by New Hampshire residents who are subject to the Massachusetts income tax," Prelogar wrote.

Additionally, New Hampshire's contention that its residents' constitutional rights were violated by being subject to Massachusetts tax when they had chosen to live in a state without an income tax can be sufficiently litigated in Massachusetts courts, Prelogar wrote. Those courts are best suited to adjudicate a case that requires an interpretation of wrongful taxation by the state.

The acting solicitor general also acknowledged that several states had weighed in as amici for New Hampshire because they want the court to speak on the broader issue of remote worker taxation. In the brief, she acknowledged the growing numbers of remote workers across the nation and the patchwork of laws on how to allocate their wages.

But this is not the right case, the acting solicitor general told the justices. She said Massachusetts' tax rule is "idiosyncratic and temporary," noting that it expires when the pandemic emergency does. Moreover, she said, the rule applies only to a very select group of employees.

New Hampshire Republican Gov. Chris Sununu in a statement Wednesday dismissed the solicitor general's brief as political sniping.

"Try as they might, overreach by Washington politicians and efforts by the Biden administration will not deter New Hampshire from fighting against Massachusetts' unconstitutional attempt to tax our citizens," Sununu said. "We remain confident that the Supreme Court of the United States will hear our case, that we will have our day in court to fight for Granite Staters and that when we do so, we will win."

Joseph Bishop-Henchman, vice president of tax policy and litigation for the National Taxpayers Union Foundation and author of an amicus brief supporting New Hampshire, told Law360 that interstate tax policy is not a federal priority for President Joe Biden's administration.

"Hence [they are] seeing this as one 'idiosyncratic and temporary' dispute rather than a big trend that needs resolution," Bishop-Henchman said.

The case began when New Hampshire, which does not impose a state income tax on the wages and salaries of its residents, brought the complaint accusing Massachusetts of violating the U.S. Constitution's due process clause and commerce clause. It did so by imposing income tax on workers who aren't setting foot in the state during the public health crisis, according to New Hampshire.

New Hampshire complained that Massachusetts was attacking its right not to impose income tax on its own residents and that New Hampshire residents physically in New Hampshire to perform work, even for Massachusetts employers, lack sufficient nexus with Massachusetts.

New Hampshire argued that while it doesn't have an income tax, even "the mere possibility of double taxation is forbidden" under the commerce clause. Its complaints, which it said amount to one state harming another, should be heard by the Supreme Court, New Hampshire said.

Massachusetts told the justices in reply Dec. 11 that New Hampshire was wrong on all counts, essentially arguing the reverse of what New Hampshire argued.

In addition to pushing back on New Hampshire's position that the case merits original jurisdiction, Massachusetts said its temporary regulation "readily passes muster" to satisfy all four prongs of 1977's Complete Auto Transit v. Brady. It taxes an activity with substantial nexus to the taxing state, it is fairly apportioned, it does not discriminate against interstate commerce, and it is fairly related to services provided by Massachusetts, the commonwealth told the justices.

New Hampshire had complained that the Massachusetts regulation violates all four prongs.

A representative for Massachusetts declined to comment when contacted by Law360 Wednesday.

New Hampshire is represented by Patrick N. Strawbridge, J. Michael Connolly and James F. Hasson of Consovoy McCarthy PLLC, and Attorney General Gordon J. MacDonald, Daniel E. Will and Samuel R.V. Garland of the New Hampshire Department of Justice.

Massachusetts is represented by Elizabeth Napier Dewar of the Massachusetts Office of the Attorney General.

The case is State of New Hampshire v. Commonwealth of Massachusetts, case number 22O154, in the U.S. Supreme Court.

--Editing by Robert Rudinger.

Update: This story has been updated with reaction from Massachusetts.

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Case Title

New Hampshire, Plaintiff v. Massachusetts

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Supreme Court

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Date Filed

October 23, 2020

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