I previously lived in one state ("A) and, while living there, began employment with an employer that pays me in part through Restricted Stock Units. These vest according to a schedule -- for simplicity, call it 25% at the end of year 1, 25% at the end of year 2, through year 4. I later moved to a different state ("B"). For simplicity, let's say I moved at the end of the first year.
My employer proposes to prorate vesting income based on days from grant date to vesting. For the first year, everyone agrees I lived in state A and the RSU vest is entirely state A income. What about year 2? I say I lived entirely in state B, and so I say the second vest is entirely state B income. In contrast, employer counts the days from grant to vest, and says half those days were state A days, half state B days, so prorates the vest accordingly. Obviously disadvantageous to me if B has a lower tax rate. But also seems deeply unfair -- each year's vest covers work done in that year. (For example, if I took an unpaid leave in a given year, that reduces year vesting in that year but has no effect on any other year.)
I found plenty of discussions about similar questions when employees receive stock options. But the value of a stock option truly relates to the entire period from grant to vest -- based on the volatility throughout the period. Somewhat different for me -- these are RSUs, with simpler understanding of valuation. Also the incremental vesting here doesn't seem to be something many states have thought about in their published guidance.
Thoughts welcomed and appreciated!
