It's a legal issue because you question the state taxing authority's treatment of the income at the state level under state tax laws. If you don't agree, there's not anything anyone here can do to defend you against the state. Only qualified legal counsel that is licensed to practice in the state can do that.
Your other option is to seek the services of the Tax Advocate in your state, if your state offers such a service. The IRS does for federal taxes. Not for state taxes. From what I see, New York does offer such a service, which you can learn about at https://www.tax.ny.gov/tra/
