Thinking about leaving California to reduce taxes before a liquidity event? It's often more complicated than it sounds.

As liquidity events approach, many employees and former employees consider relocating from California to lower-tax states like Texas. When equity compensation is involved, the potential tax savings can be significant.

But residency planning isn't just about changing an address, The California Franchise Tax Board (FTB) applies a facts-and-circumstances test to determine residency. No single factor is decisive. Instead, they evaluate the totality of a taxpayer's connections before and after the move.

A key example of this is Appeal of Bragg (2003), where the taxpayer claimed to have left California but was still taxed as a resident due to ongoing ties. That case introduced the "Bragg Factors," 19 criteria California uses to determine whether someone has truly moved.

Moving states before a liquidity event can work — but only if the move is real, early, and defensible.

For educational purposes only. Not tax, legal, or investment advice.