THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, March 1, 1995 TAG: 9503010471
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Short : 49 lines
The state will begin mailing refund checks soon to federal retirees in Virginia who have battled for nearly six years to get state income tax payments illegally collected from them.
Gov. George Allen signed a bill Tuesday authorizing refunds totaling $306 million for 147,506 pensioners or their survivors.
The state Department of Taxation is to mail the first checks March 31. Those who are due the smallest refunds will get the full amount; the rest will be repaid over five years.
The refunds amount to only 76 percent of what retirees were illegally taxed, but those who took the offer say they've waited long enough.
``It's been a long six years and I'm tired of it. I'd like to have the money as a little nest egg while I'm still around,'' said Rose Musumeci, state president of the National Association of Retired Federal Employees.
The bill reauthorizes a $351 million settlement the General Assembly approved last summer. The deal was jeopardized in January because too many retirees rejected it, but lawmakers decided to stick with the settlement and take their chances in court with those who want more money.
The cost of the settlement decreased from $351 million to $306 million because 14,258 retirees rejected the offer and another 348 told the state to keep their refunds. But the extra money could still be needed if the state loses the lawsuit.
If the state paid full refunds plus interest, the cost would exceed $700 million.
Virginia was among 23 states affected by a 1989 U.S. Supreme Court ruling that states could not tax federal pensioners while exempting state and local government retirees.
The state faced by far the largest liability in the nation because of its large population of federal retirees in the Washington suburbs of Northern Virginia and around military bases in Hampton Roads. It is also the only state not making full refunds, said Michael Kator, an attorney for the retirees.
Kator is suing on behalf of the 14,258 pensioners who felt they could get full refunds of the taxes they paid in the late 1980s through litigation.
The Virginia Supreme Court will hear arguments in spring.
KEYWORDS: FEDERAL RETIREES by CNB