State Taxation of Compensation and Benefits , written by Richard Reichler, Esq., Meltzer, Lippe, Goldstein & Breitstone LLP,focuses on the impact of state taxation on executive and employee compensation. A state's ability to assert jurisdiction to tax individuals that earn money in connection with the performance of services is based either on the individual's domicile or residence in the state, or because the individual, although a nonresident, has earned money in the state through the performance of services attributed to the state. Because there has been a significant increase in the multistate activities of key executives, the scope of source taxation of nonresidents has also increased.
State Taxation of Compensation and Benefits acknowledges these challenges and responds by providing readers with discussions and analysis regarding:
This Portfolio includes several working papers, including charts comparing taxation of deferrals to Section 401(k) plans by state and state-by-state residency requirements.
State Taxation of Compensation and Benefits allows you to benefit from:
This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.
Detailed Analysis
1750.01. Background
A. Introduction
B. State Taxing Authority In General
1. Nexus
2. Residence/Domicile
3. Funding in Trusts
4. Allocation of Income
5. Federal Limitations
1750.02. The State Income Tax Base – Conformity to Federal Base
A. General Rule
B. Other Conformity Issues
1. Joint Returns
2. Determination of Income
3. Determination of Tax Rate
C. Tax Credits
D. Exemptions
E. Itemized and Standard Deductions
1750.03. Residence or Domicile
A. In General
B. State Definitions of “Resident”
1. In General
2. Domicile
3. New York Audit Guidelines
C. Changing to a Foreign Domicile
D. Statutory Nonresidents
E. Statutory Residents
F. Residence Controversies
G. Areas of Practitioner Concern
H. Relief from Multiple Taxation
2. Constitutionality of Taxation of the Entire Income of a Statutory Resident
3. Taxation in the Case of a Change in Residence
4. Income Earned Before, But Received After a Change of Residence
5. Change of Residence and the Accrual of Income
6. Determination of Income Accruing In Connection with a Change in Residence
7. The Economic Benefit Doctrine
1750.04. State Law Considerations in Securing Deferred Compensation
1. Contract Protections Used in Pay–As–You–Go Arrangements
2. Creditor Rights and Employer Security
a. Present Creditors
b. Potential Subsequent Creditors
c. Bankruptcy
3. Funding Deferred Obligations
a. Rabbi Trusts
b. Secular Trusts
B. Impact of State Law Priorities on Funded Plans
C. Foreign Trusts
D. ERISA Coverage and Funding
E. State Income Tax Treatment of Non–Qualified Trust Income
F. State Taxation of Undistributed Subchapter J Earnings
1750.05. Source Taxation of Nonresidents
A. Allocation of Business Income Generally
B. Allocation of Employee Source Income
C. Employee v. Independent Contractor
D. Allocation of Nonresident Employee Source Compensation
E. Source Allocation Rules Applicable to Compensatory Payments
1. Deferred Compensation
2. Stock Options
3. Inconsistent Allocation Rules
4. Ballplayers and Artists – Special Rules
F. Income from Intangible Property Not Source Income
G. Deemed Intangibles
H. Intangible v. Source Income
I. Appreciation in Nonresident Compensatory Income – Intangible Income or Compensatory Income
1. Exposition of the Issue
2. Precedents with Respect to the Issue
1750.06. Source Issues With Respect To Other Compensatory Payments to Nonresidents
A. Bonus Payments
B. Severance Payments
C. Phantom Stock Plans
D. Non–Statutory Stock Options – What about the Bells and Whistles?
1750.07. Withholding and Special Accruals
1750.08. Congressional Action under the Commerce Clause
Introductory Material
A. Public Law No. 86-272
B. Public Law No. 104-95
2. Committee Report
3. “Retirement Income” Described
4. Tax-Deferred Funding Vehicles Listed in Public Law No. 104-95
a. Qualified Plans Under I.R.C. 401(a) that are Exempt under 501(a)
b. Simplified Employee Pensions under I.R.C. 408(k)
c. Annuity Contract Plans under I.R.C. 403(a)
d. Annuity Contract Plans under I.R.C. 403(b)
e. Individual Retirement Plans under I.R.C. 7701(a)(37)
f. Deferred Compensation Plans under I.R.C. 457
g. Governmental Plans under I.R.C. 414(d)
h. Trusts under I.R.C. 501(c)(18)
i. I.R.C. 3121(v)(2) Payments
(1) In General
(2) Section 3121(v)(2)
(3). Stock Option Bells and Whistles
(4) Exclusion of Severance and Other Welfare Benefits
(5) When a Plan is Established
(6) Time and Rate of Payment
(7) Ratable Payment
(8) Excess Benefit Plans
5. Constitutionality of Pub. L. No. 104-95
1750.09. Interests in Limited Liability Companies and Partnerships
1750.10. Constitutional Issues Relating to State Taxation
B. Equal Protection
C. Privileges and Immunities
D. Due Process Clause
E. Commerce Clause
F. Taxes Discriminating Against the Federal Government
1750.11. Collection of Tax
B. Minimum State Contacts to Establish a Withholding Obligation
Working Papers
Item Description Sheet
Worksheet 1 State of New York - Department of Taxation and Finance Income Tax - District Office Audit Manual Nonresident Allocation 5/4/98
Worksheet 2 [Reserved.]
Worksheet 3 [Reserved]
Worksheet 4 Pub. L. No. 104-95
Worksheet 5 H.R. No. 104-389 (Dec. 7, 1995) - Committee Report To Accompany Pub. L. No. 104-95
Worksheet 6 State Comparison Chart Taxation of Deferrals to Section 401(k) Plans
Worksheet 7 State-by-State Residency Requirements
Bibliography
BIBLIOGRAPHY