It is how NY calculates nonresident tax. New York does not tax all of the income, but it will pretend that all of the income is taxable in New York and determine how much tax they would assess on that amount. Then the tax calculated is prorated to the amount of income earned in New York. On Form IT-203, you can see this prorate calculate between Lines 45 and 46.
New York does not tax all of the income, but they do factor all of your income in to determine NY tax.
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