Taxes at IPO

[nystringe]

My startup is not public but I have received a grant for RSUs that vest at IPO. I understand that when that happens I will owe income tax, but I am not sure which state can claim that tax. In particular, suppose I worked in New York for a couple years after the grant before moving to a lower income-tax state and suppose that the IPO happens after I've moved to the lower income-tax state. Do I owe taxes to NY or my new home state?

[Rick19744 · Accepted solution]

There are too many unknown factors that could determine the outcome.  My advice is to consult with a tax professional close to, but before you actually move to determine the outcome.  Or maybe better yet, consult now to understand the consequences as it may change your mind or provide some planning opportunities.

Some factors that need to be considered:

• State tax laws vary considerably, so it will be necessary to narrow down the state(s) to research
• Will you continue to work for the same company?
• Will you be moving to a contiguous state to reside, but continue to commute to the "old" state to work

[TomYoung]

@nystringe 

As a general rule, the state you resided and worked in when you received the grant will claim the compensation created by the vesting of the RSU.   (New York certainly does.)  When you sell the stock the capital gain or loss will be reported in the state in which you reside when you sell.