In the latest but likely not final chapter of Professor Zelinsky’s ongoing challenge to New York’s convenience of the employer rule, a New York Administrative Law Judge ("ALJ") upheld application of the rule, counting days the Professor worked at his home in Connecticut for his New York employer as New York workdays, even during the over nine-month period when the employer’s New York campus was closed as a result of Covid restrictions. In the Matter of Petition of Zelinsky, DTA Nos. 830517 and 830681 (November 30, 2023).

Facts: Professor Edward Zelinsky, a tax professor at Cardozo School of Law, located in New York, sought refunds of taxes paid to New York for days he worked from his home in Connecticut for tax years 2019 and 2020, including for days when the law school was closed due to Covid restrictions. New York’s Governor issued an order in March 2020 requiring that businesses use remote work to the maximum extent possible. In compliance with the order, Cardozo closed its doors to all in-person activity, and Professor Zelinsky exclusively worked from his home in Connecticut from March 16, 2020, through the remainder of the year. In denying Professor Zelinsky’s refund claim, the Division of Taxation relied on the so-called convenience of the employer rule, which states that “any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of-state duties in the service of his Employer.” Professor Zelinsky had previously challenged the convenience of the employer rule on constitutional grounds decades earlier, and New York’s highest court upheld application of the rule. Zelinsky v Tax Appeals Trib., 1 NY3d 85 (2003), cert denied 541 US 1009 (2004).

Decision: For 2019, because the parties stipulated that Professor Zelinsky’s work situation was the same as it was for his prior challenge, the ALJ found that the Court of Appeals decision from 2003 was determinative. For 2020, the ALJ acknowledged that “[a]s the facts and effects of the COVID-19 pandemic are unprecedented,” the issue of whether the convenience of the employer rule applied was one of first impression. Nonetheless, the ALJ determined that the rule applied to Professor Zelinsky and was not unconstitutional. The ALJ found that the fact that Cardozo “did not provide accommodations but instead allowed petitioner to work out-of-state at home does not constitute necessity or requirement by Cardozo… [and] Professor Zelinsky failed to meet his burden that he worked out-of-state due to his employer’s necessity.” The ALJ further found that accepting Professor Zelinsky’s arguments would “result in special tax benefits to those who do not live in New York, but nonetheless work for, and benefit from, a New York employer.” The ALJ concluded that Professor Zelinsky’s virtual presence in New York was sufficient under the Constitution to allow New York to tax him for days he worked in Connecticut, citing the Wayfair decision.

Take Aways: The ALJ appeared to focus on the wrong question—i.e., whether Cardozo required Professor Zelinsky to work from Connecticut—rather than on whether Professor Zelinsky was permitted to work at his office in New York. If viewed from the latter standpoint, it becomes clear that because Professor Zelinsky was prohibited from working from his office in New York, the days he worked from home in Connecticut should not be sourced to New York. Furthermore, the ALJ’s reliance on Wayfair was questionable as Wayfair was not an income tax case and merely held that in the sales tax context, physical presence is not required in order to require a remote seller to withhold sales tax. Professor Zelinsky has already indicated that he intends to appeal the determination, so there will likely be more to this story.