THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, July 7, 1994 TAG: 9407070499
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 54 lines
The state Senate and the House of Delegates moved closer Wednesday to a showdown over a proposed $340 million tax settlement with federal retirees.
The two bodies remained split on how to administer tax refunds to an estimated 186,000 pensioners. The Senate endorsed refunds handled by a state court, while the House Finance Committee neared completion of a plan that would be overseen by the state tax department.
The Senate complicated the debate by broadening its bill to include a 3 percent increase in pensions for state employees and the elimination of a Social Security offset on state tax forms, a move opposed by House Finance Chairman C. Richard Cranwell, D-Roanoke County.
Despite their differences, legislators hoped to complete work in the next two days. ``My assessment is that by Friday we'll have something everyone can live with,'' Cranwell said.
More than 100 retirees plied the halls of the General Assembly to pressure legislators to agree on refunds of state income taxes levied on federal pensions between 1985 and 1988. The tax policy later was ruled illegal because the state at the same time exempted the pensions of state workers. A group of 425 retirees sued the state for up to $700 million in principle and interest.
Under both versions of the proposed settlement, retirees with claims less than $1,450 would get full refunds by next June. The remaining pensioners would be paid in installments stretched over the next five years.
One key difference between the two versions is that the House plan would require retirees to file requests for refunds, while the Senate proposal would grant refunds to all retirees, except those who chose to opt out.
As an agreement appears near, the debate has begun over attorneys' fees that would come directly off the top of each retiree's refund.
The Senate would allow a judge to set the fees. Michael J. Kator, a Washington lawyer who is suing the state on behalf of the 425 retirees, said legal fees in similar cases in other states have ranged from $3 million to $20 million.
Cranwell has proposed capping legal fees at 2.75 percent of the total refunds, or about $9.18 million.
``That would be sweet,'' a smiling Kator said when Cranwell tossed out the figure at a House Finance subcommittee.
But Del. David G. Brinkley, D-Woodbridge, said the fees were too high and would come at the expense of the retirees.
``I think Mr. Kator is a good attorney, but I don't think he's worth $9.18 million,'' Brinkley said.
KEYWORDS: RETIREES TAX REFUND by CNB