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March 10, 2021

Connecticut governor signs relief tax measure for remote workers

On March 4, 2021, Connecticut Governor Lamont signed HB 6516, providing income tax relief to residents teleworking from locations in the state due to COVID-19 restrictions. The law also establishes a nexus safe harbor preventing Connecticut tax from applying to out-of-state companies if their only connection to the state stems from the presence of these teleworking employees.

On March 5, 2021, the Connecticut Department of Revenue Services (CT DRS) issued a bulletin1 on the impact the new law will have on filing and payment obligations for tax year 2020, including individual income tax returns and liabilities due on or before April 15, 2021.

The relief provided by the new law applies to "the taxable year commencing January 1, 2020." According to the bulletin, the term "taxable year" applies to any period commencing from January 1, 2020 through December 31, 2020.


Under the new law, the CT DRS may not consider the activities of an employee who worked remotely from the state during the 2020 tax year solely due to COVID-19 in determining whether an employer has nexus with the state for purposes of any Connecticut tax. Such taxes include corporation business, pass-through entity, sales and use, and withholding taxes.

Credit against individual income tax

The new law allows Connecticut residents to claim a personal income tax credit for income tax paid to another state if:

  • The state applies a "convenience of the employer rule"2 against nonresidents who regularly work in the state
  • The state taxed the Connecticut resident's income while the resident was working remotely from Connecticut for the tax year, including when "obligated by necessity to work remotely from [Connecticut]" due to COVID-19-related restrictions

In addition, the law allows a Connecticut resident to claim a credit for income tax paid to another state if that state requires nonresident employees to pay nonresident income tax on income earned while the nonresident employee was working remotely from Connecticut due to the COVID-19 pandemic. This credit applies if, immediately before March 11, 2020, the employee was working in the other state.

The CT DRS said these credits will apply "irrespective of the provisions of Conn. Gen. Stat. §12-704," which requires (1) the tax paid to the other jurisdiction to be on income derived from sources within that jurisdiction, and (2) the income for which the credit is being claimed to be subject to Connecticut income tax.


This relief should be taken into consideration in preparing both Connecticut corporate and personal income tax returns, as well as all other Connecticut tax returns for income earned and activities occurring during calendar year 2020. Affected taxpayers that have already filed their 2020 returns should review these relief provisions and consider filing amended returns if there are any material differences in tax liabilities.

The relief provided by the new law applies to tax year 2020 liabilities only. Thus, employer and employees must consider the tax implications of Connecticut residents continuing to work from their homes in any period beginning on or after January 1, 2021.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
For state business tax issues
   • Scott Roberti (
   • Michael Keefe (
For employment and withholding tax questions
   • Ken Hausser (


1 Conn. Dept. of Rev. Serv., "Commissioner's Bulletin: Connecticut State Senate Passes H.B. No. 6516 and Immediately Transmits the Legislation to Governor Lamont" (March 5, 2021).

2 States that currently impose a "convenience of the employer rule" include Arkansas, Delaware, Nebraska, New York and Pennsylvania.


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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