A bill intended to challenge and end the ability of other states to tax income earned by Connecticut residents on days they work entirely from home is among those awaiting Gov. Ned Lamont’s signature.
Senate Bill 1558 was overwhelmingly approved by both legislative chambers on June 4, the last day of the General Assembly’s 2025 session.
An amended version of the bill was approved in the House by a 148-0 vote with three members absent or not voting. The bill was then approved unanimously (36-0) by the Senate.
Sen. Ryan Fazio (R-Greenwich), the ranking Republican senator on the legislature’s Finance, Revenue, & Bonding Committee, said the bill, which the committee approved by a 52-0 vote, attempts to address something that has been a problem for years.
“Connecticut residents who work for companies from New York or other neighboring states have been unconstitutionally forced to pay high taxes to those other states on days that they work entirely from home in Connecticut,” he said.
He noted that, under New York’s “convenience of the employer” policy, that state taxes any wages earned by Connecticut residents working for New York companies even on days the employees never actually cross the border.
“This unfairly costs Connecticut residents tens of thousands of dollars in higher taxes because of New York’s higher tax rates, and it costs the state of Connecticut up to $400 million in lost revenues,” Fazio said.
The bill creates an income tax credit for Connecticut residents who successfully challenge another state, political subdivision or the District of Columbia for taxing their income earned in Connecticut and denying them a refund on those taxes. The bill applies to tax years that began on or after Jan. 1, 2020.
“SB 1558 creates a legal strategy to end the practice in the courts,” Fazio said.
First, the bill creates a credit totaling 60% of the tax liability to pay back any Connecticut resident who is successful in court at obtaining a refund from another state, “encouraging justified litigation on behalf of Connecticut residents,” he said.
The tax credit originally was 50%, but that was raised to 60% by an amendment approved in the state House.
Second, the bill as amended directs the state attorney general to develop legal strategies “to defend Connecticut residents and taxpayers at the court level as well,” Fazio said.
“I believe the attorney general should be suing the state of New York for unconstitutionally taxing Connecticut residents when they earn income without setting foot in New York,” he said. “There is no ability for the legislature to force that in statute, nor should there be, but this new law will hopefully move the AG’s office in that direction.”
The bill requires the state attorney general to submit a report with findings and recommendations to the Finance, Revenue and Bonding Committee by Jan. 1, 2026.
There is no legal rationale for one state taxing residents of another state for labor entirely performed within the other state, Fazio said, and because it “represents a conflict between states, it could also get expedited to the Supreme Court of the United States.”
Lamont has not said publicly whether he will sign the bill.
