THE LEDGER-STAR
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, August 12, 1994 TAG: 9408120800
SECTION: LOCAL PAGE: B5 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 60 lines
House Majority Leader C. Richard Cranwell said Thursday the General Assembly may have to reconvene to fix a problem in the state's settlement with illegally taxed federal retirees.
Cranwell, D-Roanoke County, criticized the state Department of Taxation for trying to correct the problem by taking actions not authorized in legislation spelling out terms of the $340 million settlement with 186,000 federal pensioners.
By going beyond its statutory authority, Cranwell said, the tax department opened the door for a possible legal challenge of the settlement. He said if the attorney general's office could not assure him the state has a 90 percent chance of winning such a lawsuit, lawmakers should return to Richmond and rewrite the legislation.
He said legislators should know by next week whether they will need to reconvene. Some members of the House Finance Committee chaired by Cranwell suggested the legislature might be able to correct the problem at its September session on parole reform.
The problem stems from records provided by the Department of Defense on about 80,000 military retirees' pensions for the disputed tax period of 1985-1988. The pension amounts reported for each year except 1985 are incorrect.
State Tax Commissioner Danny Payne said he wants to send a letter to military retirees to fix the problem administratively. Cranwell said the letter is not authorized by the legislation.
``What's concerning me is how are we going to fix this, and can we fix it without legislative action?'' he said. ``Are we going to have to get the General Assembly down here and rewrite the statute? That's my biggest fear.''
He said he also was concerned that retirees would be so confused that many would opt out of the settlement. The law says that if retirees who are owed a total of more than $20 million opt out, the General Assembly must reconsider the deal.
Payne said his attempts to fix the problem have been sanctioned by the attorney general's office. Cranwell criticized both.
``I'm concerned that the legislature would take specific action and then the process doesn't take place as specified. . . . In the federal government, elected officials have little impact on what happens. I don't want the state to get that way,'' Cranwell said.
Michael J. Kator, an attorney for the retirees, said he believes the problem can be corrected without legislative action.
But he said he opposes Payne's plan because military retirees would have to compile old tax records to compute their overpayments. ``The burden can't be put on these people,'' he said after the Finance Committee meeting.
Kator said the settlement required the state to do the computations.
KEYWORDS: GENERAL ASSEMBLY VIRGINIA STATE DEPARTMENT OF TAXATION
FEDERAL RETIRESS PENSION
by CNB