Consider this example:
A person joined a company on July 1, 2019 while he was a California resident and has been working for that company since then. He received a grant of 10,000 shares of incentive stock options at $1/share with grant date of July 1, 2019, a 4-year vesting schedule, and a 12-month cliff. He moved to Texas on August 1, 2019. The options started to vest on July 1, 2020.
On December 1, 2022, he exercised and held 1,000 shares of the ISOs with the FMV of $5/share. Was any portion of the spread (5 - 1) * 1000 subject to AMT considerations of California?
On December 1, 2023, he exercised and sold (thus a disqualifying disposition) 1,000 shares of the ISOs with the FMV of $10/share. Was any portion of the proceeds (10 - 1) * 1000 subject to income tax of California?
So the question is essentially whether exercise of the ISOs is counted towards CA income if grant is before but vesting and exercise occur after one becomes a CA nonresident. If yes, is the grant date determining when work starts to be performed for the income such that allocation ratio is calculated as (move-out date - grant date) / (exercise date - grant date)?
