Allows certain retired federal employees to apply for tax refund

BILL NUMBER:S2661

Title of bill

An act to allow certain retired federal employees to apply for refunds from personal income taxes for the years between 1985 and 1988

Summary

Permits any retired federal employee who retired before or on the taxable years 1985 through 1988 who did not receive a formal notice from the New York State Department of Taxation and Finance that they were eligible to file a claim for a refund on their personal income taxes paid during such taxable years for taxes paid on their federal pension to be allowed to file for such a refund if they do so on or before December 31, 2005.

Justification

Currently, there is a provision in the tax law that states that an amended return must be filed within three years. However, a 1989 Supreme Court decision stated that it is illegal for states to exempt from taxes the pension income of retired State and local government employees without giving the same exemption to retired federal workers. The court decision stated that New York was among the sixteen states that discriminated against federal retirees. Pursuant to the court decision federal retirees in New York State have begun to receive millions of dollars in refunds due to dollars the state incorrectly collected over the course of several years. However, only a share of retirees affected are getting their money back, because thousands more had no idea that they had to file with the tax department five years ago in order to secure a refund. This legislation seeks to correct the inequity by requiring that retirees who were not notified of the refund opportunity to now receive notice from the New York State Department of Taxation and Finance they are eligible to file for a refund. The time frame for filing for refunds should be extended to include all retirees who were illegally taxed.

Fiscal implications

To be determined.

Effective date

Immediately.