Update on New Hampshire v. Massachusetts

The Supreme Court did not resolve the case today, but did take the noteworthy step of asking for the views of the federal government.


On Saturday, I provided an overview of New Hampshire v. Massachusetts, an important "original jurisdiction" state vs. state case currently before the Supreme Court. At that time, I noted that we might know as soon as today how the Supreme Court intended to handle case, because this is the day when the Court would issue orders related to cases that went to conference on Friday, January 22 (including this one).

In reality, the only step the Court took on the case today, was issue an order inviting the acting Solicitor General "to file a brief in this case expressing the views of the United States." Obviously, this is only a very modest step. But it does suggest the Court is taking the case seriously, and is unlikely to dismiss the case out of hand, as it did with a number of previous original jurisdiction cases, such as last month's "Texas Turkey" attempting to overturn the election results in some key swing states.

It will also be interesting to see where the Biden Administration comes down on the case. As a general rule, Democratic administrations often favor the interests of high-tax blue states, which might mean supporting Massachusetts' efforts to tax remote workers employed by Massachusetts firms, but working in other states. But, as the amicus briefs show, blue states are actually divided on this case, with Connecticut, New Jersey, and Hawaii joining a brief supporting New Hampshire. The latter is itself a purple state trending slowly blue, and a a potential swing state in presidential and senatorial elections.

One possible easy out for the administration would be to avoid taking a position on the substantive issue, but argue that New Hampshire doesn't have standing to bring the case. That might also be attractive to them because clamping down on state standing might make it tougher for red states to sue the Biden Administration itself. I hope they do not go this route, but it's certainly possible.

Historically, political liberals have often favored loose standing rules, while conservatives have favored tighter ones. But that pattern has become muddled in recent years, as both right and left often take opportunistic positions on standing, depending on whose ox is being gored in a particular case. I myself have long favored abolishing standing requirements entirely, and I have held this view during both Democratic and Republican administrations. But I admit my position isn't likely to prevail anytime soon.

Whatever the administration decides to do, it looks like this case isn't likely to go away quickly. The Court has already had it under consideration for many weeks, and it seems increasingly likely that they are going to give it a full hearing.

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  1. I thought this was already settled law thanks to New York and California. Both of who have maintained that businesses must comply with their employment laws if they hire a remote worker from one of those states. If the employment laws are based on worker location, there is no good reason for the tax laws to be based elsewhere.

    1. Justice knows no boundaries, clinger.

    2. The tax issue in this case is new. Massachusetts is making the claim that remote workers who would in normal circumstances not be remote are thus not remote workers.

      It turns the tax law on its head, since tax law is currently based on actual, not assumed, physical location.

      1. To be blunt. This is like banning the sale of gasoline using an emergency order, then demanding everyone who’d normally be using gas and thus paying the gas tax, to continue to pay you the same amount.

        You don’t get to keep taxing people for doing things when you just banned them from doing said thing. Call it the cake principle.

        1. MA did not ban people from working, which indeed would be ludicrous if they expected the now-unemployed to pony up their usual taxes.

          MA banned them from working in one location, physically, in favor of a different location, remotely.

          1. MA banned them from working in Massachusetts, but permitted them to work in NH.

          2. Exactly, just like banning gasoline doesn’t ban people from driving (electric cars exist, so some few will still be able to drive).

    3. Yes, and then Taxachusetts decided to change the rules.

  2. I would hope the author of the post would comment on the standing issue, particularly as to how New Hampshire has standing. One could see how a state with an income tax would have standing, as an individual paying tax in a non-domiciled state would likely have a credit against their income tax liability in the domiciled state and thus reduce tax revenues for the domiciled state.

    But New Hampshire does not have an income tax, and so as a state it does not seem that as a state it can claim harm from the Massachusetts policy. Of course individuals domiciled in New Hampshire do have potential injury and thus one can see how they would have standing. In fact, one wonders why individuals were not selected as plaintiffs here, thus ending the standing issue.

    Any thoughts?

    1. This is addressed in the previous post that Professor Somin links to at the start of the post, which goes into a lot more of the substance of the case.

    2. My understanding is that the individual companies located in MA have standing N MA state court due to the injury of complying and the additional state income tax stemming from the additional state unemployment tax and the apportionment of state income from the 3 factor apportionment formula.
      The individual New hampshire resident would have standing in MA state court since they are injured via the additional state income tax.

      However, the individual issue and the state unemployment tax are determined under MA state law which not a federal issue thereby does not create standing in federal court.

      The 3 factor apportionment test may be a federal issue and the individually affected companies would have standing.

      Hyatt v FTB (california) may have some bearing on the how federal standing comes into play .

      Hyatt was receiving royalties from a patent, then moved from CA to Nevada. CA Franchise tax board taxed the patent royalties while Hyatt was a resident of NV. (this issue was originally addressed on state court). The second issue was suit against by hyatt against the CA FTB for harrassment, damages, etc. which was the issue decided by the SC. (my apologies for not recalling all the facts and court cases.)

    3. How about NH’s state police power and its right to protect its residents, as a semi-sovereign, from harm?

    4. Outside of jb’s reply, it would be much more difficult for NH citizens to sue MA since it would take a massive amount of time and money. First they would have to face MA courts who may just say “sovereign immunity” and send them away. Thanks to the 11th Amendment, non-residents can’t sue a state however they can sue officers of the state to obtain relief. As a state on state case it automatically can, and has, jumped to the head of the class as it were.

      1. What about the “privileges and immunities” clause of the 14th Amendment?

        1. From what I understand in the link I posted where they mention Seminole Tribe of Florida v. Florida, Congress could annul the sovereign immunity of a state to enforce the 14th Amendment but it seems like it would take an act of congress.

      2. ” Thanks to the 11th Amendment, non-residents can’t sue a state however they can sue officers of the state to obtain relief”

        Not sure that is correct – though I may be misreading hyatt v Franchise tax board (california tax authority).

        in either case, its worth exploring the reasoning holding in Hyatt.

        1. All this sounds like Catch-22. NH can’t sue because it has no harm; individuals cannot sue because of the prohibition on individuals suing a state.

          Maybe the solution is for a different state, say Connecticut which does have a state income tax to sue Massachusetts, assuming there is at least one citizen of Conn. who is affected. In either situation it would seem the entire scheme of Mass. is uneforceable, unworkable and unconstitutional.

          1. Reading the briefs, NH does suffer harm and should have standing. Essentially even though they have no earned income tax it does harm their own sovereignty in that they are being deprived of their inherent state right to apply taxes as they see fit.

            It is also a drag on NH’s economy since the remote workers would have less means to partake in their home state’s economy. Since the state of NH does have business taxes it stands to reason that the state is harmed even when one pizza delivery shop has to close its doors because the remote worker doesn’t have the free cash to order a pizza as a result of MA taking those monies.

            1. I should also clarify that individuals can sue a state in state court. It’s just that the state they’re suing has to grant them permission to do so regardless of which state they file suit in.

              For further clarity the 11th Amendment only speaks to individuals suing a state in federal court.

            2. Very big stretches of the imagination to say that NH is harmed.
              Very clearly MA is harmed.

              1. Is it? The courts have held that the Hobbs Act prohibits any robbery of a business, because the business owner could have used the stolen money to buy other stuff in interstate commerce (the “depletion of business assets” rule). The courts have held that any hate crime can be prosecuted in the federal system if the weapon or any portion thereof was transported in interstate commerce.

                Not much of a stretch to say that NH is harmed under current precedent.

          2. “All this sounds like Catch-22. NH can’t sue because it has no harm; individuals cannot sue because of the prohibition on individuals suing a state.”

            I suppose the employees could sue their employers in state court, either NH or MA, to prevent the employers from withholding.

        2. The difference lies in where the suit takes place. The 11th Amendment essentially applies only to Federal court where Hyatt v FTB, like Nevada v Hall before it, were cases where people filed suit in one state, presumably their home state, against another state.

          In short, NH residents could file a suit in NH against MA but MA can still declare sovereign immunity which is essentially the outcome of Hyatt and would likely be the outcome if NH residents tried suing MA in MA courts as well.

          1. No I don’t think they have standing, your point notwithstanding.

            The rationale that state A’s policies are injurious to State B’s citizens is so broad as to render standing irrelevant. Because of the huge amount of interstate activity, i. e., travel, commerce, regulations etc almost every activity of state A impacts the citizens of state B. In our world a plaintiff has to demostrate real, actual, verifiable, specic, identifiable harm.

  3. I would think the SCotUS case in regards to state sales tax would have some guidance for the issue. If the sales tax is owed based on the location of the buyer why wouldn’t income also be based on the location of the earner? But that is probably too easy.

  4. Back in my law school days — when the library was filled with scrolls — I edited a student note on some obscure topic of original jurisdiction. I suggested to her that she become the leading expert on original jurisdiction because there seemed to be a largely unoccupied niche. She left the law soon after graduation, and I’ve often thought it was my fault.
    Are there known acknowledged experts, or authoritative treatises, on original jurisdiction?

    1. I don’t know how acknowledged they are, but the second one seems very valuable:

      Interstate Disputes: The Supreme Court’s Original Jurisdiction
      by Joseph F. Zimmerman | Jul 13, 2006
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      United States Supreme Court: Original Jurisdiction Cases and Materials
      United States Supreme Court: Original Jurisdiction Cases and Materials
      by Gordon L. Weil | Jul 29, 2016
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  5. Doesn’t NYC have a *city* income tax as well?

    That may be the issue that both Connecticut and New Jersey are raising because both are bedroom communities of NYC. And Hawaii may be worried that HI residents who work remotely in CA are going to get hit with CA taxes.

    The big issue is if Taxachusetts gets away with this, every state will do it, for all “remote workers” and it will make a mess of things.

    1. “Doesn’t NYC have a *city* income tax as well?”

      Yes. Yonkers too. (Apparently local income taxes are a thing in 17 states, so it’s not just a NY thing.)

      “That may be the issue that both Connecticut and New Jersey are raising because both are bedroom communities of NYC.”

      NYC no longer has a “commuter tax”–it was dropped a couple of decades ago. The issue here is that NJ just wants to be able to tax all of the income itself instead of having to give credit to residents whose income has already been taxed by NY:


      1. And I’d think rightly so. If I make and sell pizzas in NJ but my tomato and mushroom suppliers are in NY, what do I owe NY on every pizza I sell? Let’s say for the sake of argument that pre-pandemic I picked up the supplies but now they are delivered by a third party from MD.

        It seems to me that the taxing states are looking for any slight nexus they can continue to cling to in order to extract every last cent from people. In that respect my NJ pizza business would have at least some marginal nexus tied to NY but I’m not selling pizza in NY as I’m only delivering inside NJ.

    2. I think the blue states in the Northeast are coming to the sobering realization that their gravy train may be ending. While not all jobs can be done remotely, the jobs that *can* be are disproportionately higher paying jobs, and these states rely on high earners for much for their income tax. And the fact remains, the Northeast sucks. The weather is bad, traffic is terrible, cost of living is high, taxes are high, and so on and so forth. If people can avoid these taxes simply by working somewhere remotely else, there’s literally no reason to be there, outside of family and friend connections that some people may prioritize.

  6. “views of the United States.”

    The only proper response is “The United States has no views on these kind of disputes between states. No federal interest is involved”.

    1. Federal interest may be involved since state income taxes are deductible from federally taxes.

      Can companies fire, then rehire employees in the state they reside as remote workers?

      1. Um, not right now. Trump eliminated the SALT deductions — Biden wants to restore it.

        1. Republicans capped SALT deductions but did not eliminate them.
          The other interest the IRS has is not getting involved in a legal dispute over whether Massachusetts has a claim on a federal tax refund owed a New Hampshire resident. The federal government should ask the court to grant leave to file the complaint, which is the main question at this stage. Citizens have no good remedy in this situation when their only other legal remedy is in the courts of a state where they don’t live and where challenging tax asessments is difficult.

  7. The supreme court inviting the federal government into an issue between two states shows where the actual insurrection is going.

  8. I would like to know more about the details of implementing this tax. I assume that it requires the Massachusetts companies and the payroll companies they contract to go along with this. (I’m a people manager in Massachusetts with remote employees.) For example, if I go into the HR system and change someone’s status to remote, i.e., change their office location status so the are home-based, and not in MA anymore, and they live outside of MA, that should flow through to the payroll company, ADP, for example, who should just do what they always do. Has MA told employers and payroll companies to NOT make such changes until further notice? And, how can this be LEGAL? How can you alter compliance with tax LAW through regulation?

    Second, what about people who were working in MA offices for out-of-state companies and living in NH or RI or another state other than MA, and who changed their status to home-assigned when the pandemic struck? Can MA force a NC company to withhold MA income tax when there is no longer any MA association? And if they are doing that, how is that LEGAL?

    1. See 830 CMR 62.5A.3.

      1. Yes thanks, I did. Not all regulations are “legal.” They just get away with them. Here they are saying ‘during the pandemic, let’s pretend you are doing what you did before the pandemic.’

  9. From a standing perspective this seems very similar to the Texas matter. The state doesn’t have a cognizable interest in how another state assesses income taxes any more than in how it conducts elections, and without such an interest can’t sue on its own behalf or through parens patriae on behalf of its citizens. Given that standing for Texas was found lacking a month ago I don’t see how the Court could find it for New Hampshire now.

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