Current through Register 1531, September 27, 2024
(1)
Scope of Regulation; Background; Outline of Topics; Effective
Dates.
(a)
Scope of
Regulation. 830 CMR 62.5A.3 sets forth the sourcing rules that
apply to income earned by a nonresident employee who telecommutes on behalf of
an in-state business from a location outside the state due to the COVID-19
pandemic.
(b)
Background. In response to the COVID-19 pandemic,
Massachusetts and other states have declared states of emergency and issued
temporary social-distancing measures and other restrictions. Many businesses
and employees have adopted telecommuting arrangements in response to the
pandemic.
For Massachusetts personal income tax purposes, Massachusetts
residents are generally taxed on all of their income from whatever sources
derived. M.G.L. c. 62, § 2. Nonresidents are taxed on items of gross
income from sources within the Commonwealth, including income derived from or
connected with any trade or business, including any employment, in
Massachusetts. M.G.L. c. 62, § 5A(a). Wage income paid to an individual
that is subject to the Massachusetts personal income tax generally must be
withheld upon for each payroll period by his or her employer. M.G.L. c. 62B,
§ 2. 830 CMR 62.5A.3 sets forth general rules applicable to nonresident
employees who are telecommuting on behalf of an in-state business from a
location outside the state due to the COVID-19 pandemic, and explains the
parallel treatment that will be accorded to resident employees with income tax
liabilities in other states that have adopted similar sourcing
rules.
(c)
Outline of Topics. 830 CMR 62.5A.3 is organized as
follows:
1. Scope of Regulation; Background;
Outline of Topics; Effective Date
2. Definitions
3. Massachusetts Source Income for
Nonresidents Telecommuting due to Pandemic-related Circumstances
4. Sourcing Rules in Other States
(d)
Effective
Dates. 830 CMR 62.5A.3 applies to the sourcing of wage income
attributable to employee services performed commencing March 10, 2020 through
90 days after the date on which the Governor of the Commonwealth gives notice
that the Massachusetts COVID-19 state of emergency is no longer in
effect.
(2)
Definitions. Unless the context requires otherwise,
for the purposes of 830 CMR 62.5A.3, the following definitions apply:
Massachusetts COVID-19 State of
Emergency. The state of emergency in the Commonwealth of
Massachusetts proclaimed in the Governor's Declaration of a State of Emergency
to Respond to COVID-19, issued March 10, 2020.
Nonresident. Any natural person who is
not a Massachusetts resident.
Pandemic-related Circumstances,
generally include the following situations;
(a) a government order issued in response to
the COVID-19 pandemic,
(b) a remote
work policy adopted by an employer in compliance with federal or state
government guidance or public health recommendations relating to the COVID-19
pandemic,
(c) the worker's
compliance with quarantine, isolation directions relating to a COVID-19
diagnosis or suspected diagnosis, or advice of a physician relating to COVID-19
exposure or,
(d) any other work
arrangement in which an employee who performed services at a location in
Massachusetts prior to the Massachusetts COVID-19 state of emergency performs
such services for the employer from a location outside Massachusetts during a
period in which 830 CMR 62.5A.3 is in effect.
Resident. Any natural person domiciled
in Massachusetts or any natural person who is not domiciled in Massachusetts,
but who maintains a permanent place of abode in Massachusetts and spends in the
aggregate more than 183 days of the tax year in Massachusetts, including days
spent partially in and partially out of
Massachusetts.
(3)
Massachusetts Source Income for Nonresidents Telecommuting Due to
Pandemic-related Circumstances.
(a)
In General.
Under M.G.L. c. 62, § 5A(a), income of a nonresident derived from a trade
or business, including any employment, carried on in the Commonwealth is
sourced to Massachusetts. Pursuant to this rule, all compensation received for
services performed by a nonresident who, immediately prior to the Massachusetts
COVID-19 state of emergency was an employee engaged in performing such services
in Massachusetts, and who is performing services from a location outside
Massachusetts due to a Pandemic-related Circumstance will continue to be
treated as Massachusetts source income subject to personal income tax under
M.G.L. c. 62, § 5A and personal income tax withholding pursuant to M.G.L.
c. 62B, § 2.
(b)
Apportionment Based on Days Spent Working in
Massachusetts. Consistent with the rule set forth in 830 CMR
62.5A.3(3)(a), a nonresident employee who, prior to the Massachusetts COVID-19
state of emergency, determined Massachusetts source income by apportioning
based on days spent working in Massachusetts in accordance with
830 CMR
62.5A.1(5)(a), must continue
to do so based on:
1. the percentage of the
employee's work days spent in Massachusetts during the period January 1 through
February 29, 2020 as determined under
830 CMR
62.5A.1(5)(a); or
2. if the employee worked for the same
employer in 2019, the apportionment percentage properly used to determine the
portion of employee wages constituting Massachusetts source income on the
employee's 2019 return. For example, if a nonresident employee is working from
home full-time due to a Pandemic-related Circumstance, but during the period
January 1 through February 29, 2020 the employee worked five days a week, two
of those days from an office in Boston and three of those days from home, 40%
of the employee's wages would continue to be Massachusetts source
income.
(4)
Sourcing Rules in Other States. Other states have
adopted or may adopt sourcing rules similar to the rule in 830 CMR 62.5A.3(3).
A resident employee who, immediately prior to the Massachusetts COVID-19 state
of emergency, was an employee engaged in performing services from a location
outside of Massachusetts, and who began performing such services in
Massachusetts due to a Pandemic-related Circumstance, will be eligible for a
credit for income taxes paid to the state where the employee was previously
providing services, to the extent provided under M.G.L. c. 62, § 6(a). In
addition, the employer of such employee is not obligated to withhold
Massachusetts income tax to the extent the employer remains required to
withhold income tax with respect to the employee in such other state.
