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Imagine you live in California and get a job that pays you $X salary plus equity vesting at 1000 shares per year. After a year, you move out of California and

Imagine you live in California and get a job that pays you $X salary plus equity vesting at 1000 shares per year. After a year, you move out of California and continue at the same job. In year 1, you'll pay California taxes on the 1000 shares that vested at the end of that year. What about years 2, 3 and 4? You'd guess that you wouldn't pay any California taxes on those vest events. Because you 'earnt' those shares after you left CA. Not so fast. Because you were living in CA when those 4000 shares were granted (on a 4 year vesting schedule), you'll pay taxes on these proportions of each vesting event: Year 1: 100% (lived in CA since grant to vest date) Year 2: 50% (lived in CA for half the time between grant and vest) Year 3: 33% Year 4: 25% So, even though you lived in CA for only 25% of the time, you pay CA tax on over 50% of your shares.

refurb 5y ago
This is basically my understanding. Any income that could be connected to California will be subject to taxes. Or at least the FTB will try. I know some folks who left the state and got a “taxes owed” notice from FTB. They replied with “i haven’t set foot in CA for 3 years, I don’t owe anything” and the FTB dropped it. It’s basically the same as NY and NJ which does it’s best to get its pound of flesh.
- lotsofpulp 5y ago
  NY is currently forcing employers to withhold income tax for people in NJ who have not been in NY in the last 18 months. I know quite a few companies who told their employees they will not stop withholding NY taxes from their income, and the issue is currently making its way through the courts. Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states. https://www.cbsnews.com/news/supreme-court-wont-allow-new-hampshire-to-sue-massachusetts-over-income-tax-fight/ https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...
paxys 5y ago
Got a source for that? I can say with confidence that I personally know dozens of people who have moved out of state with granted but unvested RSUs from their companies and exactly 0 have paid any taxes to California for them.
- itake 5y ago
  I can say with confidence that the people you personally know are committing tax fraud.
  - MR4D 5y ago
    You might want to double check your confidence - unless I’m reading it horribly wrong, Investopedia supports the previous post, not yours. [0] - https://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp https://www.investopedia.com/articles/tax/09/restricted-stoc...
    - rahimnathwani 5y ago
      If you want to know about California tax law, and you have three options: A) An article on Investopedia, that has a section about taxes in general, but not about California tax in particular. B) A comment from someone on HN talking specifically about California tax law. C) A publication by the California Franchise Tax Board. Which would you pick? If you chose B, check out my earlier comment. If you chose C, check out https://www.ftb.ca.gov/forms/misc/1004.html https://www.ftb.ca.gov/forms/misc/1004.html Not sure why you would choose A, as it's neither specific to California taxes, nor is it an authority.
      - pc86 5y ago
        Does it feel good to be this needlessly hostile to random people on the internet?
        nick__m 5y ago
        What is so hostile about the previous post ? P.s. I am not a native english speaker so I must be missing something.
dmitrygr 5y ago
Having spoken to a tax accountant on this, i was told that (1) CA will try to claim this, (2) no state will extradite to CA you over this as they don't recognize it, so (3) at most you just cannot ever go to CA, nothing else will happen to you, if you refuse to pay.
- jdavis703 5y ago
  Well I could imagine having outstanding warrants is going to get flagged on a background check.
pc86 5y ago
This is similar in vein to GDPR (hear me out) - not in content of course but in the general thought process (ideology?) of those behind it. California is free to make up whatever nonsense California wants to make up. It doesn't mean that anyone needs to recognize it or be bound by it if they're in California. Just as the GDPR doesn't actually have any authority over US companies that don't operate within the EU, if I'm not a resident of California, California can say whatever it wants about my tax status but that's just not how it works in reality. No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't. To my knowledge this hasn't been adjudicated to any court outside of California so whether or not it's legal in a broader sense remains to be seen. It's certainly possible, but until there's case law to support California taxing former residents on income earned/vested after California residency ended, it's fanciful.
- rahimnathwani 5y ago
  You're right about the parallel. If you never again step foot in California, and have no assets in California, then perhaps there's no way for California to enforce their claim. But, even if no other state would enforce California's claim, couldn't the FTB get a court judgement against you in California? And then enforce by nabbing you next time you pass through SFO, or by seizing any property you might have?
- lotsofpulp 5y ago
  > No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't. There are a ton of people in the Northeast waiting for the courts to review why NY and MA are entitled to income tax from them even though they have not stepped foot in either state in 18 months. The question is do you have enough time and money to fight it long enough in court while CA/NY/MA can lean on the employers and national banks to simply withhold the funds. Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states. https://www.cbsnews.com/news/supreme-court-wont-allow-new-hampshire-to-sue-massachusetts-over-income-tax-fight/ https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...

refurb 5y ago

This is basically my understanding. Any income that could be connected to California will be subject to taxes. Or at least the FTB will try. I know some folks who left the state and got a “taxes owed” notice from FTB. They replied with “i haven’t set foot in CA for 3 years, I don’t owe anything” and the FTB dropped it. It’s basically the same as NY and NJ which does it’s best to get its pound of flesh.

lotsofpulp 5y ago
NY is currently forcing employers to withhold income tax for people in NJ who have not been in NY in the last 18 months. I know quite a few companies who told their employees they will not stop withholding NY taxes from their income, and the issue is currently making its way through the courts. Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states. https://www.cbsnews.com/news/supreme-court-wont-allow-new-hampshire-to-sue-massachusetts-over-income-tax-fight/ https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...

paxys 5y ago

Got a source for that? I can say with confidence that I personally know dozens of people who have moved out of state with granted but unvested RSUs from their companies and exactly 0 have paid any taxes to California for them.

itake 5y ago
I can say with confidence that the people you personally know are committing tax fraud.
- MR4D 5y ago
  You might want to double check your confidence - unless I’m reading it horribly wrong, Investopedia supports the previous post, not yours. [0] - https://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp https://www.investopedia.com/articles/tax/09/restricted-stoc...
  - rahimnathwani 5y ago
    If you want to know about California tax law, and you have three options: A) An article on Investopedia, that has a section about taxes in general, but not about California tax in particular. B) A comment from someone on HN talking specifically about California tax law. C) A publication by the California Franchise Tax Board. Which would you pick? If you chose B, check out my earlier comment. If you chose C, check out https://www.ftb.ca.gov/forms/misc/1004.html https://www.ftb.ca.gov/forms/misc/1004.html Not sure why you would choose A, as it's neither specific to California taxes, nor is it an authority.
    - pc86 5y ago
      Does it feel good to be this needlessly hostile to random people on the internet?
      - nick__m 5y ago
        What is so hostile about the previous post ? P.s. I am not a native english speaker so I must be missing something.

dmitrygr 5y ago

Having spoken to a tax accountant on this, i was told that (1) CA will try to claim this, (2) no state will extradite to CA you over this as they don't recognize it, so (3) at most you just cannot ever go to CA, nothing else will happen to you, if you refuse to pay.

jdavis703 5y ago
Well I could imagine having outstanding warrants is going to get flagged on a background check.

pc86 5y ago

This is similar in vein to GDPR (hear me out) - not in content of course but in the general thought process (ideology?) of those behind it. California is free to make up whatever nonsense California wants to make up. It doesn't mean that anyone needs to recognize it or be bound by it if they're in California. Just as the GDPR doesn't actually have any authority over US companies that don't operate within the EU, if I'm not a resident of California, California can say whatever it wants about my tax status but that's just not how it works in reality. No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't. To my knowledge this hasn't been adjudicated to any court outside of California so whether or not it's legal in a broader sense remains to be seen. It's certainly possible, but until there's case law to support California taxing former residents on income earned/vested after California residency ended, it's fanciful.

rahimnathwani 5y ago
You're right about the parallel. If you never again step foot in California, and have no assets in California, then perhaps there's no way for California to enforce their claim. But, even if no other state would enforce California's claim, couldn't the FTB get a court judgement against you in California? And then enforce by nabbing you next time you pass through SFO, or by seizing any property you might have?
lotsofpulp 5y ago
> No other state recognizes FTB's jurisdiction over former-Californian-now-State-X-residents. If you don't live in California when your shares vest, California can claim it has a right to some tax revenue, but it doesn't. There are a ton of people in the Northeast waiting for the courts to review why NY and MA are entitled to income tax from them even though they have not stepped foot in either state in 18 months. The question is do you have enough time and money to fight it long enough in court while CA/NY/MA can lean on the employers and national banks to simply withhold the funds. Edit: I missed this update, but apparently the SC told NH they cannot sue MA, so as far as I now, NY and MA have been cleared to continue collecting income tax from people not working in their states. https://www.cbsnews.com/news/supreme-court-wont-allow-new-hampshire-to-sue-massachusetts-over-income-tax-fight/ https://www.cbsnews.com/news/supreme-court-wont-allow-new-ha...