State Taxation

[HCE]

According to my understanding, if a person earns compensation and defers under a NQDC plan in state A, but then retires and moves to state B, state A can't touch the money unless it is paid out over 10 year (since state A is not the domicile -- see code section 114).

What if a participant has deferred compensation

1. from 2022 to be paid out in a lump sum.
2. from 2023 to be paid out over 15 years.

Should 1 be taxed in state A and 2 be taxed in state B?  Or do we look at plan benefits as a whole, and tax it all in state B?

 

EDIT:  I guess another question is this -- if we look at the plan benefits as a whole, they are paid out over 10 years, but they are no longer substantially similar payments (since half is paid in a lump sum and half over 10 years).  So does that mean NONE of this qualifies as retirement income under Code Section 114?

[Peter Gulia]

Here’s 4 U.S.C. § 114: http://uscode.house.gov/view.xhtml?req=(title:4 section:114 edition:prelim) OR (granuleid:USC-prelim-title4-section114)&f=treesort&edition=prelim&num=0&jumpTo=true