Withholding for Employees Working Remotely During the COVID-19 State of Emergency
The purpose of these rules and regulations is to provide guidance to employers who have implemented remote working requirements for their employees, some of whom are performing services on behalf of their employer from a location outside the state where their employees were based prior to the COVID-19 State of Emergency.
These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4, § 44-30-95 and § 44-30-71, which specifically authorizes the Tax Administrator to prescribe regulations for determining the amount of income taxes to be withheld from wages. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-2.10 of the Rhode Island Administrative Procedures Act.
These rules and regulations shall be liberally construed so as to permit the Tax Division the authority to effectuate the purpose of R.I. Gen. Laws Title 44-30 and other applicable state laws and regulations. These rules and regulations apply to employers whose employees would otherwise be subject to Rhode Island withholding and are temporarily performing their work functions outside of Rhode Island solely because of the ongoing COVID-19 State of Emergency. These rules and regulations also apply to employers whose employees would otherwise not be subject to Rhode Island withholding and are temporarily performing their work functions within Rhode Island solely because of the ongoing COVID-19 State of Emergency.
If any provision of these rules and regulations, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be impaired or affected thereby.
A. “COVID-19” means the disease caused by the novel coronavirus SARS-CoV-2.
B. “COVID-19 State of Emergency” means the state of emergency declared by
the Governor of Rhode Island in response to the 2019 novel coronavirus
C. “Nonresident individual”, as defined in R.I. Gen. Laws § 44-30-5(b), means an individual who does not meet the definition of "resident individual."
D. “Outside of Rhode Island” means any other state but Rhode Island within the geographical limits of the United States of America.
E. "Resident individual", as defined in R.I. Gen. Laws § 44-30-5(a), means an individual who is domiciled in Rhode Island or an individual who is not domiciled in Rhode Island but maintains a permanent place of abode in Rhode Island and is present in this state for an aggregate of more than one hundred eighty three (183) days of the taxable year, unless the individual is in the Armed Forces of the United States.
14.6 Non-Resident Individuals Employed by a Rhode Island Employer but Temporarily Remotely Working Outside of Rhode Island
A. The State of Rhode Island will continue to treat as Rhode Island-source income the income of employees who are non-resident individuals temporarily working outside of Rhode Island solely due to the COVID-19 State of Emergency. The Division of Taxation reserves the right to review the facts and circumstances of individual cases and make any appropriate determinations in accordance with Rhode Island law.
B. Example: A resident individual from State A works for a Rhode Island employer, normally performs his or her tasks within Rhode Island, and has wages that are subject to Rhode Island income tax withholding. If the employee is temporarily working within State A solely due to the COVID-19 State of Emergency, the employer should continue to withhold Rhode Island income tax since the employee’s work is derived from or connected to a Rhode Island source.
14.7 Resident Individuals Employed by an Employer Outside of Rhode Island but Temporarily Remotely Working in Rhode Island
A. The State of Rhode Island will not require employers located outside of Rhode Island to withhold Rhode Island income taxes from the wages of employees who are resident individuals who are temporarily working within Rhode Island solely due to the COVID-19 State of Emergency.
B. Example: A Rhode Island resident individual works for an employer in State B, normally performs his or her tasks within State B, and has wages that are subject to State B income tax withholding. If the employee is temporarily working within Rhode Island solely due to the COVID-19 State of Emergency, the employer will not be required by Rhode Island to withhold Rhode Island income taxes from that employee’s wages for the duration of the emergency.
14.8 Limited Duration of These Rules
A. These rules and regulations shall expire on September 13, 2021 at 11:59 p.m., unless one of the following occurs sooner:
1. Permanent rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 42-35-2.6 through 42-35-2.9; or
2. The Tax Administrator enters into a withholding agreement with any other state(s) pursuant to R.I. Gen. Laws § 44-30-72 that would then govern the withholding of income taxes between Rhode Island and the other signatory state(s); or
3. The State of Rhode Island requires a different expiration date in accordance with R.I. Gen. Laws § 42-35-2.10.
14.9 Limited Applicability of These Rules
A. These rules and regulations:
1. Apply to employers whose employees are temporarily performing remote work outside of Rhode Island solely because of the ongoing COVID-19 State of Emergency.
2. Shall not apply to employers outside of Rhode Island who, prior to March 9, 2020, were withholding Rhode Island taxes from the wages of their employees working remotely in Rhode Island.
3. Shall not apply to employers in Rhode Island who, prior to March 9, 2020, were withholding another state’s taxes from the wages of employees working remotely in that other state.
4. Do not apply in situations where the employer and its employees, albeit working remotely, are situated in the same state. In that event, Rhode Island personal income tax requirements, as set forth in statutes and regulations, still apply.
5. Apply to wages earned on or after March 9, 2020 until one of the relevant conditions set forth in Section 14.9 above is satisfied as it relates to the employer.
6. Do not apply to payments required to be made under the Rhode Island Employment Security Act (Titles 28-42, 28-43, and 28-44 of the General Laws), the Rhode Island Temporary Disability Insurance Act (Titles 28-39 and 28-40 of the General Laws), or the Job Development Assessment (Section 28-43-8.5).
14.10 Reconciliation with Sourcing Rules in Other States
Other states have adopted and may adopt sourcing rules that subject an employee who is a Rhode Island resident and is suddenly working within Rhode Island due to the COVID-19 State of Emergency to still incur an income tax liability in another state pursuant to that state’s sourcing rules. That employee will be eligible for credit for taxes paid to that other state under R.I. Gen. Laws § 44-30-18. Furthermore, the employer of such an employee is not obligated to withhold Rhode Island income tax to the extent the employer remains required to withhold income tax with respect to the employee in such other state.
|Title||280||Department of Revenue|
|Chapter||20||Division of Taxation|
|Subchapter||55||Personal Income Tax|
|Part||14||Withholding for Employees Working Remotely During the COVID-19 State of Emergency|
|Type of Filing||Amendment|
|Effective||08/30/2021 to 09/13/2021|
Regulation Authority :
R.I. Gen. Laws § 44-1-4
R.I. Gen. Laws § 44-30-95
R.I. Gen. Laws § 44-30-71
Purpose and Reason :
Under the emergency regulation, the income of employees who are nonresidents temporarily working outside of Rhode Island solely due to the pandemic will continue to be treated as Rhode Island-source income for Rhode Island withholding tax purposes. Additionally, Rhode Island will not require employers located outside of Rhode Island to withhold Rhode Island income taxes from the wages of employees who are Rhode Island residents temporarily working within Rhode Island solely due to the pandemic.
Editorial Notes :
The agency requested a revision to the effective dates for this emergency amendment which was promulgated on August 30, 2020. As a result, the effective dates have been revised and the regulation will now become ineffective on September 13, 2021.
Brief statement of Reason for Finding Imminent Peril :
In response to the Governor's state of emergency declaration on March 9, 2020, as well states of emergency declared by other states and the federal government, Rhode Island and other states, along with many private employers, have implemented work-from-home (i.e., remote working) requirements for their employees to practice social distancing and minimize the spread of COVID-19. In Rhode Island and other states, employers withhold state taxes from the wages of their employees who work within the employer’s state’s boundaries. As a result of the remote working requirements, many employees now receive wages for work performed on behalf of their employers but performed at locations outside the state where their regular workstations were previously located. Rhode Island statutory law requires “[e]very employer…transacting business within this state and making payment of any wages subject to Rhode Island personal income tax to a resident or nonresident individual shall deduct and withhold from the wages…tax…in…an amount… reasonably estimated to be due…from the inclusion in the employee's Rhode Island income of his or her wages received….” R.I. Gen. Laws § 44-30-71(a). Rhode Island regulatory law provides that “[a] Rhode Island employer must withhold Rhode Island income tax from the wages of an employee if: (a) [t]he employees' wages are subject to Federal income tax withholding, and (b) [a]ny part of the wages were for services performed in Rhode Island.” 280-RICR-20-55-10.6(C)(1). Given the temporary nature of the COVID-19 State of Emergency and the remote-working assignments, confusion, extra costs, and concerns may arise among employers and employees if employers have to withhold and remit out-of-state taxes for employees who are working remotely outside the State where their employer is located. In light of the foregoing, the Division of Taxation concludes that it is in the best interests of the public and the interests of the economy to temporarily simplify the tax withholding process with regard to remote working to promote stability, avoid further confusion in the marketplace, and reduce administrative burdens on public and private employers. Furthermore, the Tax Division concludes that an imminent peril to the public health, safety, and welfare requires the immediate promulgation of an emergency regulation, without prior notice or hearing, to introduce a degree of stability and certainty among the public, employers, employees, and tax professionals regarding Rhode Island income tax withholding requirements during the COVID-19 State of Emergency. This regulation would expire on September 13, 2021 at 11:59 p.m. to coincide with the expiration of Massachusetts regulation 830 CMR 62.5A.3 (Massachusetts Source Income of Non-Residents Telecommuting due to the COVID-19 Pandemic).