THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, January 13, 1995 TAG: 9501130514
SECTION: LOCAL PAGE: B5 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
LENGTH: Medium: 57 lines
Nearly 3,000 federal retirees were denied refunds for overpaid Virginia taxes because their claims arrived too late or were ruled invalid for other reasons.
The problem applications are part of a settlement package with 169,000 retirees who overpaid state taxes and are now due court-ordered rebates.
In some cases, retirees mailed their claims by the Nov. 1 deadline, but were rejected because the envelopes weren't postmarked until the following day.
Others had lost track of former spouses whose signatures were required, and some had become too ill to return the documents in time.
In a few instances, Virginia officials sent incorrect settlement information to the retirees.
The denied claims will probably create more headaches for lawmakers who thought they had put the long-running dispute behind them. The General Assembly may revisit the settlement problem in the session that opened this week.
The glitches further complicate an already precarious situation. Officials fear that a lower-than-expected settlement offer from the state and a recent U.S. Supreme Court ruling in favor of Georgia retirees in a similar case may encourage Virginia retirees to reject a deal worked out by legislators and continue fighting for more money.
The offer from Virginia last year was 76 percent of the amount owed, compared with an 88 percent payout rate retirees said they expected when the settlement was first proposed.
If too many Virginia retirees opt out before Feb. 1, the entire settlement would be nullified.
The case stems from a 1989 Supreme Court decision that barred Virginia and other states from taxing federal pensions while exempting those of state and local government employees.
In Virginia, the two sides have been fighting ever since about whether the ruling should be applied retroactively.
In July, the General Assembly drew up a plan setting aside $340 million during the next five years, supplemented by $11 million in interest, to repay as much as possible of the taxes illegally collected in the mid-1980s.
Some intended beneficiaries won't receive a dime. Tax Commissioner Danny M. Payne said 2,978 retirees' claims were rejected - 975 because they arrived too late, 371 because they were not signed properly and 488 because of missing information. The 1,144 other claims were denied because tax officials determined that pensions were not taxed or otherwise did not qualify.
In addition, Payne said as many as 29 retirees were sent offers that were too low because of errors made by his department. But he's not sure the law gives him the authority to fix that problem. by CNB