Date: August 2, 2023Attorney: Martin D. Hauptman

Governor Murphy Reinforces the Convenience of the Employer Rule for Nonresident Employees

On July 21, 2023, New Jersey Governor Phil Murphy signed into law a noteworthy change concerning nonresident employees working for New Jersey employers. This change is particularly significant for those who are residents of states that use a “convenience of the employer” rule to determine the in-state income of New Jersey residents, such as New York.

The new legislation stipulates that the “convenience of the employer” rule will be applicable to such nonresident employees. The intent behind this adjustment is to create a balanced tax landscape, ensuring that New Jersey residents are not unfairly burdened with excessive out-of-state income taxes.

Additionally, the law aims to encourage New Jersey residents to apply for income tax refunds for previous tax years from New York and other states, where taxes were imposed even though the work was performed in New Jersey. This provision aims to correct any undue financial pressure placed on New Jersey residents as a result of the existing tax structure.

Further, to promote the relocation of employees to the Garden State, the law provides incentives to employers for moving New Jersey resident employees to work within the state. (Reference: L. 2023, A4694, effective as stated)