When is a Metro-North rail employee's pay exempt from New York income tax under the federal rule for employees 'regularly assigned' to duties in more than one state?

Plain-English summary

Metro-North Commuter Railroad Company asked the Department to apply a federal rule to three real work-assignment patterns among its employees. Under Section 7 of the Amtrak Reauthorization and Improvement Act of 1990 (now codified at 49 U.S.C. § 11502(a), after the Interstate Commerce Commission was abolished in 1996), a rail carrier employee who "performs regularly assigned duties ... on a railroad in more than one State" cannot be taxed on that compensation by any state other than the employee's state of residence. New York's own Personal Income Tax Regulations, 20 NYCRR § 132.11(b), mirror that rule: pay for regularly assigned duties in two or more states isn't New York-source income even if some of the work happens in New York.

The Department had already told Metro-North, in three earlier opinions (TSB-A-91(3)I, TSB-A-93(3)I, and TSB-A-93(11)I), that "regularly assigned" duties in more than one state means the employee's job description requires services in at least two states on a systematic basis - regardless of how the employee's time splits between them. Duties assigned across states only randomly or incidentally don't count.

Applying that test to Metro-North's three scenarios:

• Scenario 1 (crew-base check-in, then flagging elsewhere): An employee whose crew base is in Connecticut reports there to sign the register, review bulletin orders, and check his watch against the company clock - required tasks - then rides a train to perform flagging service exclusively at a New York construction site, and returns to the Connecticut crew base. The Department held that the employee's actual assigned duty (flagging) is performed in only one state, New York. The Connecticut crew-base tasks are incidental preliminaries, not a second state of assigned duty, so this employee does not qualify for the exemption; the compensation is taxable by New York.
• Scenario 2 (six-month line "picks"): Engineers and conductors pick new six-month on-train assignments on the Harlem, Hudson, or New Haven line. The Harlem and Hudson lines run entirely within New York; the New Haven line runs through both New York and Connecticut. An employee picked onto the New Haven line is regularly assigned duties in two states and qualifies for the exemption for that assignment. An employee picked onto the Harlem or Hudson line is assigned duties in only one state and does not qualify - even though that employee may have to take one mandatory "familiarization trip" a year on the New Haven line to keep dual-line qualification. That one trip day is itself multi-state work (and its pay could qualify), but it does not convert the rest of the Harlem/Hudson assignment into a multi-state one.
• Scenario 3 (Grand Central Terminal Extra List): Conductors and engineers on this list are subject to call to any of the three lines and must keep their qualifications current on all three. Being eligible for any line doesn't by itself create a multi-state assignment. The same job-by-job analysis applies: exempt when actually assigned to New Haven-line service, taxable when assigned to Harlem- or Hudson-line service.

The bottom line: the exemption turns entirely on what the job description for a specific assignment requires - systematic multi-state service, not incidental travel and not roster eligibility. Compensation that doesn't qualify for the federal exemption is New York-source income under Tax Law § 631(b), subject to New York income tax and New York withholding.

Note: In 1999, the Department issued a later "Modified Advisory Opinion" to the same petitioner (TSB-A-96(5.1)I) that narrowed this interpretation, effective for tax years beginning on or after January 1, 2000. This page describes only the analysis and conclusions of the original 1996 opinion, which remained the Department's operative position for the years before that later modification took effect.

What this means for you

Rail-industry employers and payroll departments

If you employ interstate rail workers, you cannot decide withholding based on an employee's overall roster, seniority list, or eligibility to be called to multi-state service. You have to look at what each specific assignment's job description actually requires. A crew-base check-in, a familiarization trip, or being "on call" for other lines does not, by itself, create a multi-state assignment - only work that systematically requires service in two or more states does. Track assignments (and reassignments, such as the six-month line "picks" described here) separately, since an employee's exemption status can change every time the assignment changes.

Individual interstate rail employees who live outside New York

Whether your Metro-North (or similar interstate rail carrier) pay is exempt from New York income tax depends on what your specific job assignment requires, not on how you personally happen to travel day to day. If your assigned line or duty is confined to New York (for example, the Harlem or Hudson line, or an assignment like flagging that is performed only at a New York work site), your pay for that assignment is New York-source income even if you also do preliminary tasks or travel through another state to get there. If your assigned line spans two states (for example, the New Haven line), your pay for that assignment is exempt and taxable only by your state of residence. Nonresident employees who receive New York-taxable pay must file Form IT-203 and report their New York-source income, and must pay estimated tax if withholding doesn't already cover it.

Common questions

Q: An employee's crew base is in Connecticut, but he's sent to work exclusively at a New York construction site performing flagging service. Is his pay exempt from New York tax because he starts his day in Connecticut?
A: No. The Department held that the employee's actual assigned duty - flagging - is performed only in New York. Checking in, reviewing bulletin orders, and comparing his watch against the company clock at the Connecticut crew base are incidental job requirements, not a second state of assigned duty, so the exemption doesn't apply.

Q: Does being eligible to work on any of Metro-North's three lines (as on the Grand Central Terminal Extra List) automatically make an employee's pay exempt as multi-state work?
A: No. Eligibility or "on call" status for multiple lines isn't the test. The Department looks at what the employee is actually assigned to do for each specific job: exempt when assigned to New Haven-line service (which spans New York and Connecticut), taxable when assigned to Harlem- or Hudson-line service (entirely within New York).

Q: An engineer on the Harlem line has to take one required familiarization trip a year on the New Haven line to keep his qualifications current. Does that make his whole six-month Harlem assignment exempt?
A: No. The Department held that only the pay for that single familiarization-trip day (when the employee is actually performing duties in both New York and Connecticut) could qualify as multi-state work. It doesn't convert the rest of the Harlem assignment, which is confined to New York, into a multi-state assignment.

Q: What's the underlying legal test for "regularly assigned duties ... in more than one State" under the federal Amtrak Reauthorization Act?
A: Per the Department's prior Metro-North opinions (TSB-A-91(3)I, TSB-A-93(3)I, TSB-A-93(11)I), an employee is regularly assigned multi-state duties if the job description requires the employee to perform services in at least two states on a systematic basis, regardless of the percentage of time spent in each state. Duties assigned across states only randomly or incidentally don't meet this test.

Q: If an employee's pay doesn't qualify for the federal exemption, what New York filing obligations apply?
A: That compensation is New York-source income under Tax Law § 631(b) and is subject to New York income tax and New York withholding. Nonresident employees receiving such compensation must file Form IT-203 and report the New York-source income; if withholding doesn't cover the liability, the employee must pay estimated tax.

Q: Does this 1996 opinion still reflect the Department's current interpretation?
A: Not entirely. The Department later issued a Modified Advisory Opinion, TSB-A-96(5.1)I (1999), to this same petitioner, narrowing the interpretation described here effective for tax years beginning on or after January 1, 2000. This page reflects only the analysis in the original 1996 opinion.

Citations and references

• 49 U.S.C. § 11502(a) (formerly § 11504(a)) - federal preemption of state taxation of interstate rail employee compensation for regularly assigned multi-state duties
• Pub. L. 101-322, § 7, Amtrak Reauthorization and Improvement Act of 1990 - source statute creating the exemption, applicable to compensation paid on or after July 6, 1990
• 20 NYCRR § 132.11(b) - New York Personal Income Tax Regulation implementing the federal exemption
• Tax Law § 631(b) - New York-source income rule for nonresident compensation that doesn't qualify for the exemption
• TSB-A-91(3)I, TSB-A-93(3)I, TSB-A-93(11)I - prior Metro-North advisory opinions establishing the "job description requires systematic multi-state service" test
• Tax Law § 171, Twenty-fourth; 20 NYCRR § 2376.1(a) - authority and limits for advisory opinions (fact-specific, not adjudicating disputed facts)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a96_5i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-96 (5) I
Income Tax
December 17, 1996

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I960620A

On June 20, 1996, a Petition for Advisory Opinion was received from MetroNorth Commuter Railroad Company, 347 Madison Avenue, 19th Floor, New York New
York 10017.
The issue raised by Petitioner, Metro-North Commuter Railroad Company, is
how the application of the Amtrak Reauthorization and Improvement Act of 1990
(the "Act") affects employees traveling to more than one state during the course
of their employment. Specifically, the meaning of the term "regularly assigned"
and the types of occupations and work schedules covered by the Act are at issue.
Federal Public Law 101-322, the Act, amended various provisions of Title
49 of the United States Code relating to state and local taxation of compensation
paid to employees of interstate rail carriers, interstate motor carriers and
interstate motor private carriers and applies to compensation paid on or after
July 6, 1990.
Section seven of the Act amended section 11504(a) of Title 49 of the United
States Code with regard to a rail carrier providing transportation subject to the
jurisdiction of the Interstate Commerce Commission under Subchapter I of Chapter
105 of Title 49. The Interstate Commerce Commission was abolished by Federal
Public Law 104-88, the ICC Termination Act of 1995, effective January 1, 1996.
The provisions of former section 11504(a) of Title 49 of the United States Code
are now contained in section 11502(a) of Title 49 of the United States Code.
Section 11502(a) states, in pertinent part, that:
No part of the compensation paid by a rail carrier ... to an
employee who performs regularly assigned duties as such an employee
on a railroad in more than one State shall be subject to the income
tax laws of any State or subdivision of that State, other than the
State or subdivision thereof of the employee's residence ....
(emphasis added)
Section 132.11(b) of the Personal Income Tax Regulations provides that,
pursuant to the above provision, the compensation paid to an employee by an
interstate rail carrier for performing the employee's regularly assigned duties
in two or more states does not constitute income derived from New York State
sources even though the employee performs services in New York State.
Petitioner requests an opinion as to whether the employees in the following
scenarios are covered by section seven of the Act:
Scenario 1. Certain employees of Petitioner report to work in one state,
then ride a train to a work location in another state.
As an example: an
employee whose crew base is in Connecticut, but who is instructed to perform
flagging service (protection for train movements in the vicinity of a
construction site) at a construction site in New York State on a continuing daily
basis for the duration of the construction project. In such a case, the employee
reports to work at the crew base in Connecticut. At this location he or she
signs the register, reviews bulletin orders containing information and
instructions and compares his or her watch with the company's standard clock.

-2­

TSB-A-96 (5) I
Income Tax
December 17, 1996

These three tasks are job requirements. Next, the employee takes a specific
train, as directed by a supervisor, to the location of the construction project.
(Per a requirement of the Federal Railroad Administration, Petitioner directs the
means of transportation and, if by train, the specific train to be used.) He or
she works at the New York construction site for a specified number of hours and
then travels by train back to the crew base in Connecticut. The employee is
compensated at the same hourly rate for the period beginning at the time he or
she reports to the crew base in Connecticut in the morning and ending the time
he or she reports back to the Connecticut crew base at the end of the day. A
portion of that time represents the flagging service at the construction site in
New York State and the balance represents the time signing in, checking his or
her watch against the company clock, and reviewing current bulletin orders and
other information at the crew base in Connecticut and travel time between the
Connecticut crew base and the New York construction site.
Scenario 2. Pursuant to collective bargaining agreements, Petitioner's
engineers and conductors are required to "pick" new assignments for on-train
service at least once every six months. Accordingly, there are situations where
a non-New York State resident works for six months on the Harlem or Hudson Line,
located entirely within New York State, and then works for the following six
months on the New Haven Line, which entails regular operations in both New York
and Connecticut.
The conductors and engineers are required to pick new
assignments every six months on one of the three lines, Harlem, Hudson or New
Haven. If an employee is qualified on a particular line, he or she must take a
familiarization trip at least once a year on that particular line in order to
maintain his or her qualifications on the line.
Scenario 3. Petitioner maintains what is referred to as the "Grand Central
Terminal Extra List" in connection with assignment of the conductors and
engineers on that list. The individuals on that list are subject to call to
assignment at any time on any of Petitioner's rail lines. The individuals on the
GCT Extra List must maintain their qualifications on all three Metro-North lines
at all times. This maintenance of qualifications is a condition of being listed
on the GCT Extra List. Throughout the year, the individuals on the GCT Extra
List will probably hold many jobs, possibly on all of the three lines.
If an employee of Petitioner is not a resident of New York State for
personal income tax purposes under section 605(b)(1) of the Tax Law, and such
employee is paid compensation for regularly assigned duties performed in New York
State and one or more other states in accordance with the Act, the compensation
paid on or after July 6, 1990 does not constitute income derived from New York
State sources and is not subject to New York State income tax, even though the
employee performed services in New York State.
Three Advisory Opinions were previously issued to Petitioner addressing the
applicability of section seven of the Act to Petitioner's employees. Those
Advisory Opinions were issued on March 18, 1991, TSB-A-91(3)I; April 28, 1993,
TSB-A-93(3)I; and October 19, 1993, TSB-A-93(ll)I, respectively. Those opinions
stated that the determination of whether an employee is "regularly assigned"
duties to be performed in New York State and one or more other states is a
factual matter not susceptible of determination in an advisory opinion. However,
those opinions also stated that when applying the provisions of the Act for New
York State income tax purposes, an employee is considered to be performing
"regularly assigned" duties in more than one state if the employee's job
description requires the employee to perform services in at least two states on
a systematic basis regardless of the percentage of time spent at each location.
If an employee has no standard route and is assigned duties in more than one

-3­

TSB-A-96 (5) I
Income Tax
December 17, 1996

state on a random basis, that employee is not considered to be performing
"regularly assigned" duties in more than one state.
The principles established in those opinions previously issued to
Petitioner also apply to Petitioner's employees in this case. In Scenario 1, an
employee whose crew base is located in Connecticut performs flagging service at
a construction site in New York. The assigned duties of performing flagging
service, whether considered "regularly assigned" or "randomly assigned", require
that the employee perform services in only one state, New York. The fact that
the employee signs in, reviews bulletin orders and compares his or her watch with
thecompany's clock at the crew base before going to the employee's assigned
location, as directed by the employee's supervisor, does not change the
assignment of the employee's duties to perform flagging service at the
construction site in New York.
In Scenario 2, the employees who are engineers and conductors are
"regularly assigned" duties on a systematic basis. That is, the duties are
assigned every six months when the employee "picks" the new assignment. When the
employee "picks" or is assigned to on-train service on the New Haven line, the
employee will be regularly assigned duties in more than one state. With respect
to employees assigned to the Harlem or Hudson lines, the employee will not be
regularly assigned duties in more than one state. However, if an employee, who
is regularly assigned to the Harlem or Hudson line, is required to take a
familiarization trip on the New Haven line in order to maintain his or her
qualifications on that line, the employee is regularly assigned duties in more
than one state for the day that the employee is assigned to on-train service on
the New Haven line.
In Scenario 3 of this case, the employees who are conductors and engineers
on the GCT Extra List are subject to assignment at any time on any of
Petitioner's rail lines and "will probably hold many jobs" throughout the year.
The fact that these employees may be assigned to a job on any of the rail lines
does not necessarily mean that these employees have regularly assigned duties in
more than one state. The determination of whether an employee is regularly
assigned duties in more than one state is based on the job description for each
of the particular jobs that the employee is assigned. As in Scenario 2, the
employee is regularly assigned duties in more than one state when the employee
is assigned to on-train service on the New Haven line. However, the employee is
not regularly assigned duties in more than one state when the employee is
assigned to on-train service on the Hudson or Harlem line.
In all the scenarios above, it must be remembered that the determination
of whether an employee is performing "regularly assigned" duties in more than one
state is based on the job description of the employee's assignment describing the
services the employee is being compensated for by Petitioner.
If the job
description of the employee's assignment requires the employee to perform
services (other than incidental tasks) in at least two states on a systematic

-4­

TSB-A-96 (5) I
Income Tax
December 17, 1996

basis regardless of the percentage of time spent at each location, the employee
is considered to be performing "regularly assigned" duties in more than one
state. If the job description does not require the employee to perform services
(other than incidental tasks) in more than one state on a systematic basis, that
employee is not considered to be performing "regularly assigned" duties in more
than one state.
Accordingly, with respect to New York nonresident employees of Petitioner
referred to in Scenarios 1, 2 and 3 above who are assigned duties in only one
state, the employees do not meet the requirements of section seven of the Act
exempting the employees from New York State income tax on the compensation paid
for these duties. However, the employees in Scenarios 2 and 3 who are assigned
to on-train service duties on the New Haven line, are performing regularly
assigned duties in both New York State and Connecticut and will meet the
requirements of section seven of the Act exempting the employees from New York
State income tax on compensation paid for these duties. The compensation paid
on and after July 6, 1990 to those employees who do not meet the requirements of
section seven of the Act for duties performed in New York State constitutes
income from New York sources pursuant to section 631(b) of the Tax Law. Such
compensation is subject to New York State income tax and New York withholding
requirements.
The determination of whether an employee is "regularly assigned" duties to
be performed in New York State and one or more other states is a factual matter
not susceptible of determination in an advisory opinion. An advisory opinion
merely sets forth the applicability of pertinent statutory and regulatory
provisions to a "specified set of facts". Tax Law, §l71.Twenty-fourth; 20 NYCRR
2376.1(a).
It should be noted, that New York nonresident employees who receive
compensation subject to New York State income tax are required to file Form IT­
203, Nonresident and Part-Year Resident Income Tax Return, and report to New York
any items of income derived from or connected with New York sources.If tax is
not required to be withheld, estimated tax is required to be paid.

DATED: December 17, 1996

s/John W. Bartlett
Deputy Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.