The New York Division of Tax Appeals (DTA) held that a taxpayer’s employment severance payment received over a year after her relocation out of the state was allocable to New York for personal income tax purposes.
The taxpayer worked for a school in New York for 11 years before going on sabbatical leave and moving to Hawaii at the end of 2018. The taxpayer was terminated in June 2019 and she signed a separation agreement and release in February 2020 which provided for a severance payment. The severance amount was computed as a percentage of her salary plus health insurance costs. The taxpayer testified that her severance package was intended to compensate her for the missed opportunity to work at another school for the school year and for a release of any known or unknown claims against the school.
The DTA held that the severance was New York source income under Tax Law § 631 (b)(1)(F) as income received by a nonresident related to a business, trade, profession or occupation previously carried in New York, including termination agreements. Additionally, the taxpayer’s general release that listed a wide range of claims rather than a specific claim was in the nature of severance pay and not damages received in settlement of litigation. Lastly, the DTA held that prior conflicting rulings were made before the legislative enactment of the above referenced subsection.
Matter of Vora, Determination DTA No. 830987 (N.Y. Div. Tax. App. 2024).