Hilands v. Department of Revenue

Full title: DAVID E. HILANDS and EVADNE A. HILANDS, Plaintiffs, v. DEPARTMENT OF…

Court: In the Oregon Tax Court

Date published: May 2, 2001

TC 4512 (Or. T.C. May. 2, 2001)

Opinion

TC 4512

Filed May 2, 2001.

ORDER GRANTING DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT and DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

SENIOR JUDGE CARL N. BYERS

Plaintiffs (taxpayers) seek individual income tax refunds for 1997 and 1998 on the ground that their Oregon retirement benefits (PERS) were exempt from state taxation. There is no dispute of fact, and only legal issues are presented by taxpayers' appeal. Accordingly, the matter has been submitted to the court on motions for summary judgment.

FACTS

Taxpayer Evadne Hilands was a state employee between 1952 and 1989. As such, she accrued benefits and received payments from PERS in both 1997 and 1998. The state required taxpayers to include those retirement payments as taxable income. Taxpayers claim that the Oregon statute imposing tax on those state retirement benefits impaired Evadne's contract with the state in violation of Article I, section 10, of the United States Constitution.

COURT'S ANALYSIS

Taxpayers are correct that imposing taxes on Evadne's state retirement income violates her contract with the state of Oregon. The Oregon Supreme Court so held in Hughes v. State of Oregon, 314 Or. 1, 838 P.2d 1018 (1992). However, taxpayers err in concluding that the only remedy is tax exemption. In response to the legal decisions, the Oregon legislature increased the benefits to PERS retirees in order to compensate for the damages due to taxing their benefits. The Oregon Supreme Court has upheld that remedy. See Ragsdale v. Dept. of Rev., 321 Or. 216, 895 P.2d 1348 (1995), cert den sub nom Bank of California, N.A. v. Oregon Dept. of Rev., 516 U.S. 1011, 116 S.Ct. 569, 133 L.Ed.2d 493 (1995); see also Stovall v. State of Oregon, 324 Or. 92, 922 P.2d 646 (1996).

All of this was clearly explained in more detail in the magistrate's decision. However, taxpayers are not satisfied because of the disparate treatment of federal retirees.

Taxpayers may have cause for complaint, but any solution must be devised by the legislature not by the courts. Now, therefore,

IT IS ORDERED that Defendant's cross motion for summary judgment is granted, and

IT IS FURTHER ORDERED that Plaintiffs' Motion for Summary Judgment is denied. Costs to neither party.