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State tax filing
Thanks for the helpful answer. We have same understanding on C1 C3 C4 of the original post. However more ambiguities to resolve on C2 (RSU vested after leaving NY City). Can you point to the NY City tax regulations that leads to your answer below? Thanks
"For C2, the regulations state that the allocation period ends the earliest of when the stock fully vests, the stock is sold, or your employment terminates. It is not clear whether termination would equate to your reassignment to another state. So, I'm not sure you are correct in assuming there would be no New York income when the stock vests if you are no longer a New York resident, because you still work for the company."
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Below is an exhaustive detailed summary on original C2 question/confirmation. After doing much research online, I see many replies and articles using "NY" which is quite ambiguous because NY State and NY City are 2 different taxation authorities with their own rules despite sharing the same tax websites and use the same tax filing process. Perhaps it is best to ask questions for NY State and NY City separately to avoid confusion.
RSU granted in as NYS/NYC resident but vests after leaving NYS/NYC
NY State (NYS) taxes
Per original post C1 and your reply. NYS clearly say to calculate the fraction of NY work day ( days worked in NYS regardless of residency) and allocation period (grant to vest in my case). BTW, this is of course not applying Convenience of Employer Rule (company in NYS, employee working out of state for own convenience) which would make the fraction 100%.
Form to calculate the work day / allocation fraction is in IT-203-F Schedule B. It also includes details such as counting only work days only (excluding weekends, holidays, vacations, sick days)
NY City (NYC) Taxes
Your reply to original post C2 seems to be from New York State’s IT-203-F-I (Multi-Year Allocation Form Instructions) page 3 Schedule B Table.
https://www.tax.ny.gov/pdf/current_forms/it/it203fi.pdf
Box for Restricted stock row and Allocation period column states allocation period is as follows
Date stock received to earliest of:
1) date stock substantially vested
2) employee termination date
3) date stock sold
In my case, it is #1. However, this is NY State tax law (not NY City)
The actual tax law is 20 NYCCR 132.24 (New York State tax regulation on Stock options, stock appreciation rights and restricted stock) This is for NY State
https://www.law.cornell.edu/regulations/new-york/20-NYCRR-132.24
For NY City, I find no specific info on RSU on NY City Tax law. IT-306.1 (Change of City Residence) instructions states the following on page 2 upper left column
If you moved out of New York City, you must include on
Form IT‑360.1 any item of income, gain, loss, or deduction
which, under an accrual method of accounting, would be
reportable at the time you changed your residence. This
includes income or gain you elected to report on the installment
basis. You must also accrue to New York City the total taxable
amount of lump‑sum distributions subject to the separate tax on
lump‑sum distributions (Form IT‑230).
There are no specific mention of how to treat RSU vests in IT-360.1 Instructions
https://www.tax.ny.gov/pdf/current_forms/it/it360_1i.pdf
From what I’ve read, NY City tax is treated as an additional layer on top of NY State tax, NY City taxation is based on residence at the time income is earned. Here are 2 examples
There are 3 layers of taxation authority in US for NY City resident.
- Federal
- State
- City
Using an example of change residence from CA (California) to NYC with RSU granted in CA and vests in NYC
- For Federal, no difference on federal tax liabilities
- For State, CA and NY State would each get their work day / allocation period fraction.
- For NY City, vested RSU is 100% taxable. Some might say this is absurd if most of the vesting period was in CA. Such is the ambiguity of corner cases in various tax authority tax laws which only gets clarified when challenged in courts.
In the reverse case, changing residence from NY City to CA with RSU granted in NY State and vested in CA
- For Federal and state, its same as above.
- For NY City, vested RSU in CA is 100% non taxable.
As a side note, will be doing a foreign assignment for my company in South Korea in 2026... So will need to split and credit taxes at the Federal level (pay South Korea tax, get credit on US Federal tax) So I will have to deal with 3+! tax authorities in 2026. South Korea, US Federal, NY State (still have vesting RSUs granted while in NYS) But hopefully no long have to pay NY City taxes haha.
Tax court cases (or lack there of) for reference
For NY State
There are court cases over the years that created the clarification on work day / allocation fraction on IT-203-F Schedule B. NY State lost 2 cases prior to 2006 (Michaelson & Stuckless) which prompted clarification of tax laws on none resident RSU vest tax liability.
For NY City
There are no online reference to NY City having similar court cases to resolve tax law ambiguity on changing residence during RSU allocation period.
