THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, November 3, 1995 TAG: 9511030537
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 58 lines
The Virginia Supreme Court on Thursday rejected a lawyer's request to withhold his legal fees from the state refunds paid to federal retirees he successfully represented.
Michael Kator of Washington represented the federal retirees who fought the state in a pension tax dispute and prevailed. At issue was Virginia's practice of taxing federal pensions while exempting the pensions of retired state and local government workers.
The U.S. Supreme Court ruled in 1989 that such arrangements were unconstitutional. More than 153,000 retirees agreed to a $308 million settlement with the state last year, but on Sept. 15 the Virginia Supreme Court ordered a full refund to those pensioners who didn't accept the settlement.
The Virginia Department of Taxation is preparing nearly $80 million in refunds and interest to the more than 14,000 people who refused to settle.
Kator asked the Alexandria Circuit Court to order the Taxation Department to withhold 10 percent of each refund check, which could be used to pay his fee. The court rejected his request last week and he appealed to the Supreme Court.
Kator said he was disappointed by Thursday's ruling and that it ``pretty much represents the end of the case.''
He will collect his fee from the 130 retirees who hired him, but Kator believes all of the more than 14,000 should pay.
``It seems a little bit, I guess, unfair . . . that the people who have stood up in the forefront and put their name forward are going to get less than the people who just sat there,'' he said.
Attorney General James S. Gilmore III said he was glad the retirees would now be able to get the money they have been waiting for.
``I have said from the beginning of this case that it was unfair for Michael Kator to take money out of the retirees' pockets - retirees who weren't even his clients,'' Gilmore said. ``Today's victory is one for the commonwealth and the retirees.''
Virginia was one of 23 states affected by the 1989 high court ruling. Because of its large population of federal retirees outside Washington and around military bases in Hampton Roads, Virginia faced the largest liability of any state.
The General Assembly changed Virginia's tax scheme immediately after the high court ruling, but the federal retirees sued for refunds of taxes paid since 1985.
The federal retirees who accepted a 1994 state settlement will get 76 cents on every dollar they were taxed illegally. The payments are being made over five years. by CNB