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On December 28, the Connecticut Supreme Court confirmed that Connecticut properly could tax income recognized by a nonresident upon the exercise of stock options awarded as part of his compensation for services performed in Connecticut. Jefferson Allen vs. Commissioner, ____ Conn. ___ (December 28, 2016).
The taxpayer had received stock options during two periods when he was employed in Connecticut. Both sets of options were exercised after the taxpayer had become a nonresident. The taxpayer paid Connecticut tax upon each of the exercises and later sought refunds on the bases that the taxation of the options was contrary to Connecticut's own income tax regulations and also violated the due process clause of the federal Constitution.
The Supreme Court noted first that the taxpayer's claim for refund with respect to the initial exercise of options was untimely, as it was brought more than three years from the due date of the return for the tax year in which the options were exercised.
Next, the Court considered the taxpayer's contention that under the applicable income tax regulation, income from options was taxable only if the taxpayer was performing services in Connecticut at the time the options were granted as well as the time that the options were exercised. The Court rejected that construction, holding that the regulation required only that the taxpayer be performing services in Connecticut at the time the options were granted. The Court noted that construing the regulation as proposed by the taxpayer could lead to "bizarre results" in that a break of service somewhere between the time that the option was granted and the time the option was exercised would allow a taxpayer to avoid any taxation by Connecticut.Day Pitney Alert
On April 28, Scott Clark, Chair of Day Pitney's Multistate Tax Practice, presented at the Federal Tax Institute of New England 2022 conference, sponsored by the Connecticut Bar Association, on "The Cutting Edges of Multistate Taxation: Pass-Through Entities, Digital Products, Domicile Update, and more."
On April 8, Tax Attorney Mariano Beecher will be speaking at a Boston Bar Association webinar on the introduction to the practice of tax law.
On March 31, The Boston Bar Association will be hosting a virtual CLE that will provide introduction to tax issues related to cryptocurrency.
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Day Pitney Press Release
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