
    Edward B. and Florence W. GLICK v. DEPARTMENT OF REVENUE
    (TC 3649)
    Henry J. Kaplan, Portland, represented plaintiffs (taxpayers).
    Jerry Bronner, Assistant Attorney General, Department of Justice, Salem, represented defendant.
    Decision for defendant (department) rendered June 6, 1995.
   CARL N. BYERS, Judge.

Taxpayers appeal from an assessment of additional personal income taxes for 1991. The Department of Revenue (department) assessed the additional tax on pension distributions which taxpayers claim had previously been taxed by the state of Pennsylvania at the time of contribution to the plan. Taxpayers also assert that taxation of such funds by Oregon violates statutory and constitutional law. The parties have stipulated the facts and this matter is before the court on cross motions for summary judgment.

Taxpayers were employed as teachers in Pennsylvania. During their employment, they contributed to the purchase of tax-sheltered annuities under IRC § 403(b)(l)(A)(ii). The annuities were purchased by three types of contributions.

(1) Contributions were made by taxpayers by salary deduction on an after-tax basis. These contributions were subject to both federal and state of Pennsylvania income taxes at the time of contribution.
(2) Contributions were made by taxpayers by salary reduction. Taxpayers agreed with the employer to accept a reduced salary, and the employer contributed the difference to the pension plan. Contributions by salary reduction were not subject to federal income tax, but were taxed by Pennsylvania.
(3) Contributions were made by taxpayer’s employer. These contributions were not subject to either federal or state of Pennsylvania income taxes.

Taxpayers retired and moved to Oregon on August 13, 1991. In 1991, taxpayers received a total of $71,935 from the tax-sheltered annuities. For federal income tax purposes, taxpayers excluded $13,123 as a return of cost basis. This amount was attributable to contributions made by salary deduction and subjected to both federal and state tax at the time of contribution. By virtue of its exclusion from federal taxable income, the $13,123 was automatically excluded from taxpayers’ Oregon taxable income.

The remaining $58,812 was included in taxpayers’ federal taxable income and was duly reported by them. However, taxpayers believed the $58,812 had been taxed previously by Pennsylvania at the time the contributions were made. Consequently, they subtracted that amount on their 1991 Oregon income tax return.

The department contends that the $58,812 is made up of employer contributions and earnings on contributions as well as the taxpayers’ contributions by salary reduction. It is not necessary for the court to address this contention unless taxpayers prevail on the primary legal issue.

The primary legal issue is whether taxpayers are entitled to subtract all or any portion of the $58,812 under ORS 316.159.

ORS 316.159 provides in part:

“(1)(a) In addition to other modifications to federal taxable income contained in this chapter, there shall be subtracted from federal taxable income of a resident individual the distributions received by the individual from a plan or trust described under subsection (2) of this section * * (Emphasis added.)

The “plan or trust” described in ORS 316.159(2) is limited to plans coming within either IRC § 408 or IRC § 401(c)(3).

Taxpayers’ pension distributions are from IRC § 403(b) plans, a class of plan not described in ORS 316.159. It appears that the legislature did not include this class of plan because all states except Pennsylvania treat contributions to IRC § 403(b) plans as nontaxable.

Taxpayers contend that ORS 316.159 should be construed by the court to include distributions from IRC § 403(b) plans. They argue that legislative history indicates the legislature intended to exclude all pension distributions previously taxed by another state. Since all states except Pennsylvania exclude distributions under IRC § 403(b), taxpayers believe the legislature simply overlooked Pennsylvania’s circumstance.

The legislative history shows that the legislature at least had the information, if not the awareness, that Pennsylvania did not follow federal law. However, whether the legislature failed to accommodate distributions under IRC § 403(b) plans inadvertently or intentionally is irrelevant. The language of ORS 316.159 is not ambiguous and does not require construction. Taxpayers are asking the court to add something to the statute which they believe the legislature inadvertently omitted. The legislature has expressly prohibited the courts from either adding to or subtracting from legislative language. ORS 174.010.

In the alternative, taxpayers contend that ORS 316.159 violates Article I, section 20, and Article I, section 32, of the Oregon Constitution, the Equal Protection Clause, and the Interstate Privileges and Immunities Clause of the United States Constitution. In support of their contention, taxpayers argue that ORS 316.159 contains an invidious classification which discriminates against former residents of Pennsylvania. The court finds taxpayers’ arguments in support of this contention are without merit.

The statute allows a subtraction for distributions received from specified types of plans or trusts. The legislative purpose is to decrease the tax burden on particular taxpayers who moved to Oregon and received pension benefits while living here. This statute does not discriminate between states or types of income. All taxpayers who come within the terms of this statute qualify for its benefits regardless of the state of origin. If there is any discrimination, it is not a result of the Oregon statute. Taxpayers’ disadvantage, in this instance, results from the action of the state of Pennsylvania, not Oregon.

Oregon is not required to accommodate all forms and schemes of state taxation. ORS 316.159 is based upon classifications under the Internal Revenue Code, not the Pennsylvania statute. Pennsylvania may exercise its power of taxation contraiy to the federal scheme, but it cannot mandate that Oregon should conform to its statutes. Now, therefore,

IT IS ORDERED that department’s motion for summary judgment is granted.

IT IS FURTHER ORDERED that taxpayers’ motion for summary judgment is denied. Costs to neither party. 
      
       Taxpayers mistakenly filed a full-year resident return. However, that error is not important to the legal issue presented here.
     
      
       All references to the Oregon Revised Statutes are to the 1991 Replacement Part.
     
      
       ORS 174.010 provides:
      “In the construction of a statute, the office of the judge is simply to ascertain and declare what is, in terms or in substance, contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars such construction is, if possible, to be adopted as will give effect to all.”
     