KS State Worker Loses Constitutional Fight over Pension Tax

November 5, 2007 (PLANSPONSOR.com) - An employee of the Kansas Department of Revenue, who has been waging a constitutional fight against a $577 state tax bill based on pension income, has been dealt a legal setback.

The Kansas Supreme Court rejected arguments by James Weisgerber that it was unconstitutional for the state to give different treatment to public employees belonging to   Kansas Public Employees Retirement System (KPERS) than those belonging to a 403(b) plan sponsored by the Kansas City Board of Public Utilities, the Kansas Board of Regents and employees of certain Kansas cities.

Weisgerber argued the law violates the Equal Protection Clause of both the United States and Kansas Constitutions by requiring KPERS members to add back to their gross income the pension contributions made on their behalf by the state.

At issue with Weisgerber was an $577 assessment by the Kansas Department of Revenue, Division of Taxation (KDOR) for tax years 1999, 2000, and 2001 – an assessment later upheld by the State Board of Tax Appeals (BOTA).

In their ruling, justices declared: “We conclude that the statute is constitutional and affirm BOTA’s decision upholding the assessment.”

For Weisgerber’s equal protection argument to survive legal scrutiny, the justices asserted he would have had to show that all public employees are similarly situated when it comes to their pensions.  However, b ecause some have a defined benefit plan and some belong to a 403(b) plan, “this distinction alone destroys any similarity across the purported class and poses an insurmountable hurdle for Weisgerber’s equal protection claim,” the justices claimed.

Also, the justices pointed out that employee contributions to KPERS are combined with the state’s general revenues. The 403(b) plans, on the other hand, do not involve the state’s primary fiscal coffers, the justices asserted.

The opinion in In re Tax Appeal of Weisgerber,Kan. , No. 96,550, 10/26/07 is  here .