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SALT TALK: New York on My Mind – Sourcing on New York’s Mind

Wayne K. Berkowitz CPA, J.D., LL.M. 05.14.2018 | SALT TALK

Did you know that Hoagy Carmichael was an attorney? That’s right, the coauthor of the song “Georgia on My Mind" received his law degree from Indiana University in 1926. While he very briefly hung up a shingle in West Palm Beach, the composer, singer, actor, and bandleader apparently pursued other interests. I’ll bet you didn’t know that Georgia Code Title 50, State Government Section 3-60 (50-3-60) designates the song as the official song of the State of Georgia and proceeds to list the lyrics. One more diversion before we talk tax; I’ll bet you also didn’t know that the State of Georgia successfully pursued a copyright infringement action asserting that the Georgia Code is copyrighted and payment must be made for its reproduction. 

The connection you’ve been waiting for — on one day in April (the sixth), the New York State Department of Taxation and Finance released not one, but three Technical Memorandums, all addressing the sourcing of income to New York. Interestingly enough, the first and second address New York State Tax Law changes made in 2017, while the third addresses the sourcing of income related to a federal law change (Internal Revenue Code Section 457A) enacted during the Bush administration and effective as of January 1, 2009.

So can we all agree that sourcing is on New York’s mind? While residents of the State and City are taxed on their income wherever earned (with offsetting credits, where appropriate), nonresidents, former residents, and those seeking to become nonresidents (an often raised issue these days with the virtual elimination of the federal itemized deduction for state and local taxes) may be in for an unpleasant surprise. 

The Technical Memorandums address the sourcing of gains from the sale of cooperative shares where the underlying property is located in New York, sourcing of the gain or loss on certain sales of partnership and LLC interests, and the allocation of certain nonqualified deferred compensation.  The first two Memorandums reflect somewhat of a shift in thinking as the sale of an intangible (cooperative stock and partnership/membership interests) with certain exceptions, has traditionally been taxed in only the resident state. While the deferred compensation issue can arise many years after the income was “earned.” While all highly technical issues that certainly go beyond explanation via a blog post, the key as always is to talk to your advisor and discuss any proposed transactions before they happen.  If you have questions about these Memorandums or are considering a transaction, contact me at WBerkowitz@BerdonLLP.com or contact your Berdon advisor.

Wayne Berkowitz, CPA, J.D., LL.M., a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises clients on the unique requirements of governments and municipalities across the nation.

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