Updated July 29, 2026. Quick answer: For income that is protected, California concedes it in its own statute. Rev. & Tax. Code §17952.5 excludes qualified retirement income of a nonresident, and expressly applies “only to any taxable year … that the provisions of Section 114 of Title 4 … are effective.” But deferred comp that fails the federal conditions is not “qualified retirement income” — and California sources compensation to where the services were performed.
What California says on the protected side
The FTB’s own residency manual is unambiguous: “California does not tax the qualified retirement income received by nonresidents on or after January 1, 1996, even if the taxpayer performed the services that gave rise to the income in California.” That is as clean a concession as you will find, and §17952.5(b)(9) mirrors the federal §114(b)(1)(I) conditions word for word — including the ten-year test.
What happens to income outside that definition
Read this next part as an inference, because that is what it is. No single FTB sentence says “deferred comp failing §114 is California-source in the California-workday ratio.” The proposition is assembled from four separate California authorities: §17952.5 excludes only qualified retirement income; the FTB manual classifies nonqualified deferred compensation as compensation for services; it states that “the critical factor … is the place where the services are actually performed”; and the allocation regulation applies a working-days ratio. Each link is verifiable. The chain is a conclusion, not a quotation.
The example the FTB itself uses
Its manual works through a taxpayer who lived and worked exclusively in California until retiring, moved to Nevada on 1 January, and received a final paycheque there ten days later. The conclusion: the compensation “is taxable by California because the income has a source in California, the state where” the services were performed. The residence at payment is not the question.
New York reaches the same destination by an entirely different route, which matters if you have worked in both.
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Sources
4 U.S.C. §114; Cal. Rev. & Tax. Code §17952.5, including subdivision (d); California FTB Publication 1005; FTB Residency and Sourcing Technical Manual sections 3210, 3215, 3220, 3225 and 3300; Cal. Code Regs. tit. 18 §17951-5; FTB Publication 1004 (stock options and restricted stock). 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.