Is compensation a U.S. citizen who lives in Canada earns working in New York for the Consulate General of Canada considered New York source income for personal income tax purposes?

Plain-English summary

Mark Kresge, a U.S. citizen domiciled in Ontario, Canada, asked the New York State Department of Taxation and Finance whether his compensation for working at the Consulate General of Canada in Buffalo, New York, is New York source income for personal income tax purposes. He commutes daily from Canada to the Buffalo chancery, performs only governmental functions for Canada, does not maintain a place of abode in New York, and pays his own employment taxes and estimated personal income taxes directly to the IRS and to New York State.

Because Petitioner is not domiciled in New York and keeps no permanent New York abode, he is a nonresident under Tax Law § 605(b). Tax Law § 601(e) taxes a nonresident only on income derived from New York sources, computed by applying a "New York source fraction" to the tax that would apply if he were a full-year resident. Tax Law § 631(a) defines New York source income to include amounts entering into the nonresident's federal adjusted gross income that are derived from or connected with New York sources, including - under § 631(b)(1)(B) - a business, trade, profession, or occupation carried on in New York.

Since Petitioner's services are performed solely in New York, the Department concluded his compensation is New York source income "to the extent that the income is included in Petitioner's federal adjusted gross income." That condition turns on the U.S.-Canada tax treaty: if the treaty causes the compensation to be included in his federal AGI, it is New York source income; if the treaty excludes it from federal AGI, it is not New York source income. The opinion expressly declined to decide whether Petitioner's pay for discharging governmental functions for Canada is included in federal AGI or is exempt from federal tax under the treaty - that determination was left outside its scope.

What this means for you

Foreign consulate and embassy employees working in New York

If you work in New York for a foreign government's consular or diplomatic mission and are not domiciled in and keep no permanent home in New York, you're a nonresident for New York personal income tax purposes. Your New York-source wages become taxable by New York only to the extent they end up in your federal adjusted gross income - a question governed by whether an applicable U.S. tax treaty (here, the U.S.-Canada treaty) shields governmental-function pay from federal income tax.

Accountants and tax professionals

When advising a nonresident client employed by a foreign consulate or embassy, first resolve the federal treaty question (does the treaty exclude the pay from federal AGI?) before addressing New York taxability - this opinion makes New York's treatment entirely dependent on that federal determination, and it does not analyze the treaty itself.

Common questions

Q: Is Mark Kresge a New York resident or nonresident for personal income tax purposes?
A: He is a nonresident. He is domiciled in Ontario, Canada, and does not maintain a permanent place of abode in New York, so Tax Law § 605(b) treats him as a nonresident.

Q: Does working for a foreign consulate exempt his New York wages from New York tax?
A: Not automatically. The opinion does not grant a blanket diplomatic exemption; it ties New York taxability to whether the compensation is included in his federal adjusted gross income.

Q: What decides whether the compensation is in his federal adjusted gross income?
A: The U.S.-Canada tax treaty. If the treaty causes the income to be included in federal AGI, it's New York source income; if the treaty excludes it from federal AGI, it is not. The opinion does not resolve that treaty question.

Q: Does it matter that Petitioner might later become a Canadian citizen while keeping U.S. citizenship?
A: Petitioner mentioned considering acquiring Canadian citizenship, but the opinion's analysis and conclusion are based on his current status as a U.S. citizen domiciled in Canada; it does not address how dual citizenship would change the result.

Citations and references

• Tax Law § 601(e) - imposes personal income tax on nonresidents' New York source income, computed via the New York source fraction
• Tax Law § 605(b) - defines resident, nonresident, and part-year resident individuals
• Tax Law § 607(a) - terms in Article 22 generally carry the same meaning as under federal income tax law
• Tax Law § 631(a) - New York source income of a nonresident includes amounts in federal adjusted gross income derived from or connected with New York sources
• Tax Law § 631(b)(1)(B) - New York source income includes income from a business, trade, profession, or occupation carried on in New York

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a08_3i.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(3)I
Income Tax
October 3, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I080508A

On May 8, 2008, a Petition for Advisory Opinion was received from Mark Kresge, P.O.
Box 702, Buffalo, New York 14201-0702.
The issue raised by Petitioner, Mark Kresge, is whether compensation received by an
individual who is a citizen of the United States and resident of Canada for services performed in
New York for the Consulate General of Canada in New York, as a diplomatic mission of a
foreign country, is considered New York source income for personal income tax purposes.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a citizen of the United States. Petitioner established his domicile in Ontario,
Canada and maintains a permanent residence in Canada. He is not domiciled in the United States
and does not maintain a place of abode in the United States. He is employed by the Consulate
General of Canada and commutes daily from Canada to the chancery of the Consulate General of
Canada in Buffalo, New York. The services rendered are solely in the discharge of functions of
a governmental nature for Canada. Employment taxes and estimated personal income taxes are
paid directly by Petitioner to the Internal Revenue Service and to New York State.
Petitioner is considering acquiring Canadian citizenship, while keeping his United States
citizenship.
Applicable law and regulations
Section 601(e) of the Tax Law imposes a personal income tax for nonresidents of
New York State, and provides, in part:
Nonresidents and part-year residents. (1) General. There is hereby imposed for
each taxable year on the taxable income which is derived from sources in this state of
every nonresident and part-year resident individual . . . a tax which shall be equal to the
tax base multiplied by the New York source fraction.
(2) Tax base. The tax base is the tax computed under subsections (a) through (d)
of this section, as the case may be, reduced by the credits permitted under subsections (b),
(c), (d) and (m) of section six hundred six, as if such nonresident or part-year resident
individual . . . were a resident subject to the provisions of part II of this article.

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Income Tax
October 3, 2008

(3) New York source fraction. The New York source fraction is a fraction the
numerator of which is such individual's . . . New York source income determined in
accordance with part III of this article and the denominator of which is such individual's
New York adjusted gross income determined in accordance with part II of this article. . . .
Section 605(b) of the Tax Law provides, in part:
Resident, nonresident and part-year resident defined.
(1) Resident individual. A resident individual means an individual:
(A) who is domiciled in this state, unless (i) he maintains no permanent place of
abode in this state, maintains a permanent place of abode elsewhere . . . or
(B) who is not domiciled in this state but maintains a permanent place of abode in
this state and spends in the aggregate more than one hundred eighty-three days of the
taxable year in this state, unless such individual is in active service in the armed forces of
the United States.
(2) Nonresident individual. A nonresident individual means an individual who is
not a resident or a part-year resident.
Section 607(a) of the Tax Law provides:
General. Any term used in this article shall have the same meaning as when used
in a comparable context in the laws of the United States relating to federal income taxes,
unless a different meaning is clearly required but such meaning shall be subject to the
exceptions or modifications prescribed in this article or by statute. Any reference in this
article to the laws of the United States shall mean the provisions of the internal revenue
code of nineteen hundred eighty-six (unless a reference to the internal revenue code of
nineteen hundred fifty-four is clearly intended), and amendments thereto, and other
provisions of the laws of the United States relating to federal income taxes, as the same
may be or become effective at any time or from time to time for the taxable year.
Section 631 of the Tax Law provides, in part:
(a) General. The New York source income of a nonresident individual shall be the
sum of the following: (1) The net amount of items of income, gain, loss and deduction
entering into his federal adjusted gross income, as defined in the laws of the United States
for the taxable year, derived from or connected with New York sources. . . .

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Income Tax
October 3, 2008

(b) Income and deductions from New York sources.
(1) Items of income, gain, loss and deduction derived from or connected with
New York sources shall be those items attributable to:
*

*

*

(B) a business, trade, profession or occupation carried on in this state; or . . . .
Opinion
Petitioner is not domiciled in New York State and does not maintain a permanent place of
abode in New York. Accordingly, Petitioner is a nonresident for New York State personal
income tax purposes. See section 605(b) of the Tax Law. Section 601(e) of the Tax Law imposes
a personal income tax on the taxable income derived from New York sources of a nonresident
individual. The tax is equal to the tax computed as if the nonresident individual were a
New York State resident for the entire year, reduced by certain credits, and then multiplied by
the income percentage (i.e., New York source fraction). The numerator of the fraction used to
compute the income percentage is the nonresident individual’s New York source income. The
denominator of the fraction used to compute the income percentage is the nonresident
individual’s New York adjusted gross income from all sources for the entire year.
Section 631(a) of the Tax Law provides that the New York source income of a
nonresident individual includes income entering into his or her federal adjusted gross income
that is derived from or connected with New York sources. Income from New York sources
includes income attributable to an occupation carried on in New York.
Since the compensation in this case is attributable to services performed by Petitioner
solely in New York State, it is considered New York source income for personal income tax
purposes to the extent that the income is included in Petitioner’s federal adjusted gross income.
Accordingly, if, pursuant to the tax treaty between the United States and Canada,
Petitioner's income is included in his federal adjusted gross income, then Petitioner's
compensation in this case attributable to services performed by Petitioner solely in New York
State will be considered New York source income for personal income tax purposes.
Conversely, if, pursuant to the tax treaty between the United States and Canada, Petitioner's
income is not included in his federal adjusted gross income, then Petitioner's compensation in
this case attributable to services performed by Petitioner solely in New York State will not
be considered New York source income for personal income tax purposes. This Opinion does not
address whether the income received by Petitioner for the discharge of functions of a

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Income Tax
October 3, 2008

governmental nature for Canada is included in federal adjusted gross income or exempt from
federal personal income tax pursuant to the treaty between the United States and Canada.

DATED: October 3, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.