Why is it fraud? It's an actual apartment that they can use when they are in the city for work. It's not like it's just a mail drop, it's a physical apartment and the employee is on the lease.
My employer doesn't ask me where I've established residency, they ask for my "Home address", and if I can't find anything in our employee manual describing what a home address is other than "where you can receive mail". I don't know what Google's policy is.
In the US, your W-2 employer has to withhold your taxes on behalf of the state so they have to have your legal residence. I suppose you could file a tax return where you later claim that you weren't really a NY resident but a CT resident, but then you're going to have to file taxes with CT and pay out of pocket with penalties (since you were supposed to have them withheld from your paycheck) and NY will probably dispute your return, as they have documented proof of you being a NY resident. Especially if your income is high, which will be the case for many Google employees, it's a bad idea to have your residency in that dispute state where multiple states can claim you as a resident.
You can prove to either CT or NY that it's not your primary residence for tax purposes, but even if you can't, you may still be better off paying double taxes to avoid a 15 - 20% pay cut.
The pay cut mentioned for Connecticut is 15% and that likely doesn't cover the RSU, so the realistic cut in the pay rate may be more like 5-10%, depending on your function and level. NYC marginal tax rate for a typical Google employee is going to be around 10%. And that's before you take into account the actual cost of this scheme.
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