THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, December 16, 1994 TAG: 9412160564
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY WARREN FISKE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 56 lines
Leaders of two large groups of federal retirees urged their members on Thursday to accept Virginia's offer to refund $340 million in state income taxes that were wrongly collected in the late 1980s.
``I am wholeheartedly in favor of settling this,'' said Oscar J. Honeycutt, the immediate past president of the state chapter of the National Association of Retired Federal Employees. He warned that continued litigation for a better deal would drag on and that many retirees might die before receiving a refund.
John C. Chapman, president of the Military Retirees Taxpayers Association, agreed. ``This settlement will guarantee that we will be repaid in five years,'' he said. ``If we don't take it now, I don't think I'll ever see that money in my lifetime.''
The pensioners were joined by House Majority Leader C. Richard Cranwell, D-Roanoke County, who toured the state Thursday, urging federal retirees to accept the settlement.
The dispute stems from the state's former policy of taxing the pensions of federal retirees while exempting the pensions of former state employees. The U.S. Supreme Court has ruled that states must have identical taxation policies for both groups.
Between 1985 and 1988, the state collected about $458 million in wrongly assessed taxes on federal pensions. Earlier this year, the retirees and state political leaders negotiated a settlement for a $340 million refund - or about 78 cents on every $1 wrongly paid.
About 169,000 federal retirees are eligible for the refund. They have until Feb. 1 to accept the deal. If retirees representing at least $20 million opt out, the settlement will be nullified unless the General Assembly reauthorizes it by March 1.
A U.S. Supreme Court ruling earlier this month has left some Virginia retirees wondering whether they could get a better deal. The high court ruled that Georgia must refund 100 percent of the money plus interest in taxes it illegally collected from federal pensioners.
But Chapman said holding out for full payment plus interest - estimated at $700 million - would be risky for Virginia retirees. Georgia's taxation policies differed from Virginia's, he said, and there is no guarantee the Supreme Court would order a full settlement in Virginia.
Chapman also noted that the $340 million settlement was ``negotiated in good faith with the state'' months before the Georgia decision.
Cranwell guaranteed that the state will pay the full $340 million if the settlement in accepted. But if retirees seek to renegotiate the deal, he warned, they might face ``a lot of competing interests'' for limited funds. ``I would urge everyone not to take that chance,'' he said.
State Attorney General James Gilmore said the settlement ``remains in the best interest of all Virginians.'' by CNB