Overview
For additional guidance, please refer to Steptoe's COVID-19 Resource Center.
The disruptions to business caused by COVID-19 are widely known and widely addressed (including in this alert). Less known, however, is a potentially serious personal income tax consequence that could result from COVID-19 dislocation.
In general, states impose personal income taxes on all income received by their residents. The term "resident" is often defined as an individual who is domiciled in the state or is a statutory resident of the state. Statutory residence is triggered in whole or in part by a nondomiciliary individual's presence in the jurisdiction for more than a specified number of days during a tax year.
Individuals desiring to avoid statutory residency in a state often will structure their affairs to fall below the state's statutory residence days threshold. However, the travel restrictions (and quarantining) currently being implemented as a response to COVID-19 could disrupt that planning and result in an individual involuntarily exceeding the state's days threshold.
Of interest here are the New York State Department of Taxation and Finance's Nonresident Audit Guidelines (Audit Guidelines), which provide guidance as to the counting of days when medical circumstances cause an individual to remain in New York. The Audit Guidelines, citing case law, distinguish between a day spent in a New York medical facility (which, in general, is not included as a day in New York) and a day spent in New York receiving outpatient treatment (which, in general, may be counted as a day in New York).
Travel restrictions resulting from the COVID-19 pandemic do not fall clearly into either of the categories considered by New York's Audit Guidelines. Certainly, there are arguments for not counting such days toward a finding of statutory residence. However, a better approach may be to avoid the issue by altering one's plans for the remainder of 2020 so as to remain below the statutory residence days threshold in the state at issue.
In all circumstances, the maintaining of accurate records is essential, and is best achieved on a day-by-day basis rather than by attempting to re-create one's schedule months or even years later.