The California Office of Tax Appeals (OTA) held that severance payments and employer-paid medical premiums received following an employee’s termination constituted income from intangible personal property and were therefore sourced to the taxpayer’s Nevada domicile. The taxpayer, a former California-based bank CEO, was terminated without cause in late 2015, relocated to Nevada around the same time, and received severance payments and medical insurance benefits in 2016 pursuant to his termination agreement. Under California law, income from intangible personal property earned by a nonresident is generally sourced to the taxpayer’s state of domicile.
The FTB argued that the termination payments should be treated as California-sourced wages, relying on federal authorities such as United States v. Quality Stores, Inc. and California EDD regulations characterizing severance pay as wages. The OTA rejected this position and further concluded that the FTB failed to provide persuasive legal authority sufficient to overturn, distinguish, or depart from precedent.
Appeal of Otting, No. 230914221, 2026-OTA-403P, at 15 (Cal. Off. Tax Appeals May 18, 2026) (pending precedential).