
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, July 23, 1994                   TAG: 9407260059
SECTION: VIRGINIA                    PAGE: C-5   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Short

PENSIONERS LOSE BID TO SUE VA. TAX CHIEF

A federal judge on Friday dismissed a lawsuit by federal pensioners against Virginia Tax Commissioner Danny M. Payne, which sought to hold him responsible for taxes the state wrongly collected.

Some state officials viewed the suit, filed by three pensioners in March, as an ``end run'' around Virginia's pensioner tax dispute. The suit sought more than $700 million.

U.S. District Judge James R. Spencer said Payne could not be held personally responsible for the tax problem.

``The plaintiffs cannot avoid the preclusive effect of the Tax Injunction Act by cleverly styling their case or by framing their claim as a civil rights violation,'' Spencer wrote.

John F. McClelland, Thomas B. Worsley and Christopher J. Giaimo argued in their suit that the state had violated their civil rights by refusing to refund their taxes.

They sought to hold Payne, who became tax commissioner Feb. 18, responsible to an estimated 186,000 federal retirees for more than $700 million in damages.

The General Assembly and Gov. George Allen approved a $340 million settlement with federal pensioners this month.

Refunds will be made over five years beginning in March. A federal retiree may opt out of the settlement and pursue the matter in state courts.

The retirees have sought refunds since 1989, when the U.S. Supreme Court ruled states could not tax federal pensions while exempting from taxation the benefits paid to retired state and local government workers.

Virginia was among 23 states that had done so.

by CNB