THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, November 10, 1995 TAG: 9511100500
SECTION: LOCAL PAGE: B7 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Short : 41 lines
Federal and military retirees who rejected the state's offer to settle a decade-old tax dispute will have reason to celebrate this weekend.
Thursday, the Virginia Tax Department mailed 14,278 refund checks totaling $78.7 million - an average of $5,511 per retiree.
The checks represent principal and interest on money that federal retirees paid from 1985 to 1988 under a pension tax plan later ruled illegal.
In September, the Virginia Supreme Court ruled that the state must make full refunds - plus interest - to retirees who did not accept the General Assembly's settlement offer earlier this year.
Some 150,000 retirees jumped at the offer - 75 cents on the dollar with no interest, paid over five years - to end the long dispute and avoid the risk of losing in court.
Checks for the first installment of the settlement were mailed in March. The final four payments will be issued each March through 1999.
The nearly 15,000 retirees who will get their refunds in one lump sum have not heard the last from state tax officials. The interest on their lump-sum checks will be subject to both federal and state income taxes.
The dispute dates to a 1989 U.S. Supreme Court decision, which found that Virginia and several other states illegally taxed federal pensions while exempting state and local counterparts. The decision left it to Virginia courts to determine what, if any, refunds were required.
The Democrat-controlled General Assembly - which at the time was faced with a recession - decided to take its chances in court rather than issue refunds estimated at $468 million. Republican Gov. George F. Allen forced the issue after he was elected in 1993 promising to settle the case.
Retirees with questions can call the Tax Department at 1-800-730-8730.
KEYWORDS: PENSION VIRGINIA INCOME TAX REFUND RETIREE by CNB