Tax Type
Individual Income Tax
Description
Retirement benefits
Topic
Taxable Income
Date Issued
03-13-1992
March 13, 1992
Re: §58.1-1821 Application: Individual Income Tax
Dear******************
This will reply to your recent letter, in which you request relief of additional tax assessed to you for taxable year 1988.
ACTS
You are a retired employee of the United States and failed to include retirement benefits in Virginia taxable income when filing your 1988 Virginia return. As the result of a review by the department, these benefits were added to your Virginia taxable income and an assessment for additional tax was issued. You question this assessment based upon the U. 5. Supreme Court's 1989 decision in Davis v. Michigan.
DETERMINATION
The U. S. Supreme Court held in Davis v. Michigan that states must provide equal tax treatment to federal and state pensioners. However, the court did not mandate that equal treatment be provided on a retroactive basis. Immediately after the court's decision in 1989, the General Assembly equalized the tax treatment of all pensioners (public and private sector), thus satisfying the court's mandate.
The issue of retroactive application was considered by the Virginia Supreme Court, which held on November 8, 1991 that Davis was to be applied prospective-only (Harper v. Virginia Department of Taxation, 242 Va. 322). The Virginia court's decision is now on appeal to the U. S. Supreme Court, along with a similar case from South Carolina
Until the retroactivity issue is resolved by the courts, the department must continue to enforce the law as it was in effect prior to 1989.
As such, the assessment issued to you for 1988 is correct and payable.
However, in the event that the courts ultimately resolve the retroactivity issue in favor of federal retirees, you may submit a refund request to the department for the tax and interest assessed and paid for taxable year 1988. Under Virginia Code §58.1-1823, you would also be able to request refunds for taxable years 1985, 1986, and 1987 to the extent that tax was paid on your federal pension. Under the law, the refund requests must be filed within one year from the date of the final court decision resolving the retroactivity issue.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner