The 28% is being applied to your NY tax liability.
When you look at the income on the IT-203 lines 1-31, you'll see a column for Federal amounts and a column for the amount allocated to NY. Let's assume, for illustration purposes only, that you made a total of $100,000 all year. $28,000 was earned in NY, $72,000 was earned in CA.
On the IT-203, line 31 you'll see the $100,000 adjusted gross income in the federal column and the $28,000 in the state column. Then on line 36, after the state standard/itemized deductions you'll see your state taxable income - this is the federal adjusted gross income from line 31 less the state standard deduction. Let's assume your state taxable income is $92,000 after subtracting the state standard deduction of $8,000.
Next, on line 38, NY calculates the NY tax liability based on the state taxable income of $92,000. Let's assume, the tax comes out to $5,000 on line 28.
After taking into account any tax credits you may qualify for, line 44 shows your net tax liability. We'll say it's still $5,000 in our example.
Then line 45 shows the income allocation percentage - which takes the state column from line 31 and divides it by the federal column from line 31.
Line 46 then takes the net tax from line 44 and multiplies it by the income allocation percentage from line 45. This gets your prorated tax based on how much income you actually earned within the state.
