@GeorgeDenseff - Thank you for the response and pointer. To my limited ability, I have researched the New Jersey temporary guidance. This is the only relevant update I could locate (posted by NJ Division of Taxation on 03/30/2021):
Tele-Commuting and Corporate Nexus - As a result of COVID-19 causing people to work from home as a matter of public health, safety, and welfare, the Division will temporarily waive the impact of the legal threshold within N.J.S.A. 54:10A-2 and N.J.A.C. 18:7-1.9(a) which treats the presence of employees working from their homes in New Jersey as sufficient nexus for out-of-state corporations. In the event that employees are working from home solely as a result of closures due to the coronavirus outbreak and/or the employer’s social distancing policy, no threshold will be considered to have been met.
The guidance seems to be focused on waiving nexus for out-of-state employers who have employees who are working at home in New Jersey as a result of closures due to Covid. The guidance to those employers is that they can continue to source the income of those employees based on the laws of the employer’s jurisdiction. This guidance does not seem to relate to my daughter’s situation -- a non-resident who has not lived/worked in New Jersey. From what I can tell, New Jersey tax rules continue to require income to be taxed where an employee does the work and the temporary ruling does not mean that they have adopted a “convenience of the employer rule” to tax non-residents who work outside New Jersey. This seems to be supported by New Jersey having joined the New Hampshire Supreme Court case that challenged the authority of states to tax nonresidents’ income while they’ve been working from home.
Our next steps, I think, are to continue to appeal to my daughter’s employer (for a letter) and/or the NJ Division of Taxation, with the facts (as suggested by @TomD8), perhaps enlisting their taxpayer advocate for assistance. I am not sure she would be successful in amending her Maryland return to claim credit for the New Jersey taxes as Maryland imposes taxes (and a withholding requirement on the employer) for individuals who are domiciled in the state.
