@Saad2027uk -
1) ask KPMG to show you the law that they are following
2) find another firm that is of the size and stature of KPMG and be willing to pay them for the advise.
3) if your friend believes there is a safe harbor rule, they need to provide the documented evidence from the State. Otherwise, does it really exist or is it just an 'urban myth'?
Hard to believe a firm as large as KPMG, with many clients in your situation, would not have a clear and documented approach for this issue. They probably see it 'all the time'.
What I gather is that since the severance was based on the number of years of employment (and so was "earned" in all those prior years), the part that was 'earned' years ago when working in NY, is subject to NYS income tax now.
Also, and I am not a lawyer (but I can read!), see this link.
https://www.tax.ny.gov/pdf/advisory_opinions/income/a05_2i.pdf
if you read through the example on page 5, it does appear that the calculation goes back to the years working in NYS (and a close look at the example is that is does go back more than 3 years, debunking that there may be a 'safe harbor' rule).
