Quote:
Originally Posted by Jkgourmet
Personally, I'd call irs myself. THEN I
would contact (and pay for his/her time) a cpa or enrolled agent to put it in writing.
Signed, an ex-accountant. (PS I know nothing about bailey, but have a very hard time thinking that any ira distribution isn't subject to NC state taxes.)
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Thanks. The IRS rules are clear enough, it is all taxable for my federal return. And since posting, I have found NC DOR documents explaining the Bailey settlement, and for state and federal retirees
who qualify under the terms of the Bailey settlement ( five years service before settlement date ), IRA distributions ( for those qualifying under the settlement ) are not subject to NC taxes
if the deposits were made before the settlement date.
The more I dig into the Bailey settlement, the more fascinating it becomes.
The Bailey Settlement was the result of a lawsuit in North Carolina ( based on a US Supreme Court ruling ) that went to the NC Supreme Court. Result is that my federal pension is reportable but is not taxable in North Carolina, since I had more than 5 years federal service
before the settlement date ( 12 August 1989 ). My 401-K ( IRA ) withdrawals are taxable, because the deposits started
after the settlement date. Social Security is not taxable in North Carolina for anyone, is only taxable for federal returns. So for North Carolina tax, I only pay on IRA withdrawals and savings interest.
Following are quotes from the attorney ( Eugene Boyce ) involved in the settlement.
https://www.seanc.org/assets/The_Bailey_Case_summary.pdf
"No controversy in the history of North Carolina has involved more legal complexities, more people, and more money than the case of Bailey, et. al. v. The State of North Carolina."
"In early 1989, the U. S. Supreme Court had before it the question whether or not state and federal government retirees, not merely active government employees, are entitled to equal income tax treatment as between federal retirees and retirees of Michigan state government. North Carolina and 22 other states, the Supreme Court said, had been exempting state government employees from income taxation while taxing their retired federal and military citizens."
"On March 28, 1989, the U. S. Supreme Court ruled that the constitutional doctrine and federal law that requires equal, reciprocal treatment among Michigan’s state government employees and 23 other states (including North Carolina) gave state and local government employees an exemption from state income tax and thus must give equal treatment to federal and military retirees living in their state. Every state must either tax all government employees equally or exempt all equally. Governments are immune from taxation by other governments."
North Carolina then repealed the tax break for state employee retirees to avoid giving the break to federal retirees. So Bailey and others ( 300,000 state employees ) brought suit. It ended up costing the NC government over a billion $$.
"The Big Mistake: The state’s big mistake occurred on Aug. 12, 1989. Session Law 729 took away the tax exemption promised to hundreds of thousands of teachers and state and local government workers for 50 years. The promise was first made in 1939 and was in effect until 1989. Public employees who retired after 1989 were also deprived of the tax benefit that, at least in part, lured them into state employment and for which they dedicated many years in a career of public service."
"The Bailey case teaches a simple lesson: Employers who make promises must keep their promises to those who fulfill their part of the employment agreement - and this includes even our great State as the employer."
Not saying I fully understand it all, but I think I have my answers.
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