Updated July 29, 2026. Quick answer: A lump sum satisfies neither condition in 4 U.S.C. §114(b)(1)(I). It is not a series of substantially equal periodic payments over ten years or a lifetime, and unless it comes from an excess-benefit plan it is not protected on that ground either. So the state where you performed the services can tax it, however long ago you left.
Why the intuition fails here
The natural assumption is that once you are a resident of a no-income-tax state, income received there is taxed there. For wages and most income that is broadly how it works. Deferred compensation is the exception the federal statute was written to address — and it only closed the door part way.
The federal rule in one sentence. 4 U.S.C. §114(a) provides that “No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State.” But for a nonqualified plan, §114(b)(1)(I) counts the income as protected “retirement income” only if it is part of substantially equal periodic payments made over the recipient’s life or “a period of not less than 10 years” — or if it comes from an excess-benefit plan.
The comparison that makes it concrete. Two executives with identical deferred balances leave the same California employer for Nevada in the same year. One elected a lump sum; the other elected ten annual instalments. The instalment recipient is protected by §114. The lump-sum recipient is not, and California can assess the whole amount. Same employer, same work, same move — different election, made years earlier.
The one thing that can still save a lump sum
If the payment comes from a plan maintained solely to provide benefits in excess of the qualified-plan limits, the second safe harbour applies and the schedule does not matter. That is a narrow category and it is not satisfied merely because a plan is nonqualified — New York has already tested exactly that argument and rejected it.
Whether the schedule can still be changed is a separate question with its own hard rules — see the §409A re-deferral requirements.
Sources
4 U.S.C. §114(a) and §114(b)(1), including subparagraph (I) and its clauses (i) and (ii); IRC §3121(v)(2)(C); IRC §409A(a)(2)(A) and (a)(4)(C); IRC §415 and §401(a)(17). All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.