Incentives Watch: Virginia Encourages Telework by Offering Tax Credit, Adopting Taxpayer-Friendly Nexus Policy

Telework has enabled many companies to allow more employees to work from home. Some advantages to this include less traffic and strain on the environment.

However, as the workforce has become more mobile, many states have sought to tax telecommuting employees’ wages. The presence of a single telecommuter in a state is also sufficient to trigger nexus for an out-of-state corporation, state tax officials from 37 jurisdictions indicated on the Bloomberg BNA 2011 State Tax Department Survey.  The New Jersey Superior Court recently ruled that a single employee telecommuting from New Jersey establishes nexus, therefore, subjecting an out-of-state company to the New Jersey corporation business tax. For more information about the Telebright decision, check out this Weekly State Tax Report article written by Bloomberg BNA State Tax Law Editor Priya Nair. 

Despite telework's capacity to boost employment rates and reduce traffic congestion—despite its capacity to cut oil consumption, carbon emissions and transportation infrastructure costs—the Telebright decision will discourage companies from distributing its workers, Nicole Belson Goluboff, Legislative Advisor to the Telework Coalition, told Bloomberg BNA March 7.

At the same time, some states, such as Virginia, aim to encourage telecommuting by offering tax credits and a more taxpayer-friendly nexus policy for out-of-state corporations. Under H.B. 2197 and S.B. 1335 enacted by Virginia last year, a telework expenses tax credit is available for employers incurring telework expenses or conducting telework assessments. The credit is equal to the amount of telework expenses incurred during the 2012 and 2013 calendar years, up to $50,000. Virginia was one of only five states that indicated on the Bloomberg BNA survey that it would not find nexus existed for an out-of state corporation with a telecommuter within its jurisdiction.

By:  Steve Roll andKathleen Caggiano

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