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Practices & Industries

New York Tax Appeals Tribunal Issues Stock-Option Decision

July 4, 2005

This article originally appeared in State Tax Notes, July 4, 2005. Reprinted with permission.

For years, taxpayers and practitioners have contended that New York's taxation of stock-option income was problematic, in large part because the position was spelled out in a Technical Services Bureau memorandum, not in a statute or regulation. On May 12, the New York State Tax Appeals Tribunal rendered its decision in Matter of Stuckless. In that decision, the tribunal rejected New Yorks' long-standing policy on the treatment of a nonresident's stock-option income.

The decision calls into question New York's grant-to-exercise methodology for the taxation of option income, thereby providing a basis for alternative allocation methodologies in current audits. The decision may also provide a basis for taxpayers to file claims for a refund of taxes, interest, and penalties that were paid based on the grant-to-exercise method.