U.S. Supreme Court rejects New Hampshire’s tax lawsuit against Massachusetts

(The Center Square) – The U.S. Supreme Court has rejected a lawsuit filed by New Hampshire over cross-border taxation from neighboring Massachusetts.

The Granite State sued its neighbor last year over a pandemic-related rule that required out-of-state residents who were working remotely to pay Massachusetts’ 5% personal income tax even if they weren’t physically coming to their jobs in the state. New Hampshire argued that the requirement was unconstitutional, and petitioned the high court to take up the case.

But a majority of the court, which didn’t comment on the litigation, refused to grant permission for New Hampshire to sue Massachusetts in court.

Justices Clarence Thomas and Samuel Alito were the only members of the court who would have allowed the lawsuit to proceed.

The Biden administration had urged the Supreme Court not to take up the case, arguing that justices’ jurisdiction over cross-border tax disputes “should be used sparingly.”

Gov. Chris Sununu, who vowed to fight “all the way” on the tax fight, criticized the high court’s ruling.

“By siding with the Biden Administration and allowing inappropriate taxation of NH citizens, the Supreme Court is setting a costly precedent,” Sununu said in a statement. “This decision will have lasting ramifications for thousands of Granite State residents.”

U.S. Sen. Jeanne Shaheen, D-N.H., said she was also “disappointed” by the court’s ruling which “punishes NH workers, particularly since so many put the health of their families & communities first to work from home amid the pandemic.”

“I’ll continue to pursue legislative solutions in Congress to right this wrong,” Shaheen posted on social media.

Massachusetts enacted the emergency rule in response to the coronavirus outbreak, requiring out-of-state residents who were working for Massachusetts employers before the pandemic remain subject to the income tax, even if they were working from home. New Hampshire doesn’t have an income tax.

The regulation is set to remain in effect for at least 90 days after the state of emergency in Massachusetts was lifted on June 15.

New Hampshire’s lawsuit contends that Massachusetts has no constitutional authority to collect an income tax on employees who physically worked in the state prior to the pandemic.

“It undermines New Hampshire’s sovereign duty to protect the economic and commercial interests of its citizens,” the 36-page complaint reads.

An estimated 100,000 New Hampshire residents cross the state line into Massachusetts for work – roughly 15% of all commuters, according to the lawsuit.

Massachusetts has argued in legal briefs that the tax policy “passes legal muster” and urged the high court to toss out New Hampshire’s complaint.

Sununu has accused Massachusetts revenue officials of trying to “pick the pockets” of New Hampshire residents.

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