This line applies only to individuals who were civilian employees of the United States Government during 2005. The Court of Appeals held that Arizonas taxing scheme for years after 1990 did discriminate against federal employees by taxing their retirement plan contributions but not those of state and local employees. The department has appealed that determination to the Arizona Supreme Court, so the issue is not yet final.

This entry is provided to alert you to a remedy available to you under Arizona law. On your 2005 return, you have two options.

Option #1

You may subtract the amount of contributions made to your federal retirement plan during 2005. Enter the 2005 amount of such contributions included in your federal adjusted gross income. If you choose this option and the courts ultimately decide that it is legal for the State of Arizona to tax your retirement contributions, you will owe additional tax and accrued interest. (Also, see Protective Claim for Refund below.)

Option #2

You may choose to ignore this entry. You may instead file the protective claim form. This form is in this instruction booklet. Under this option you will pay tax on your contributions to the federal retirement plan. You will also protect your rights to a credit or refund of this tax if the courts ultimately decide that is appropriate. The state will pay interest in this event. The courts have been asked to award up to 20% of your refund to the attorneys in the case.

Protective Claim for Refund

You can find this form at the bottom of the page titled Notice to Current And Former Federal Civilian Employees. If you were a civilian employee of the United States government at any time during the years 2000 through 2005, you should complete this claim form. Submitting this claim form will protect your rights to tax relief for the years you were so employed. If you choose option #2 for 2005, you should also include 2005 in your claim. Claims for 2000 must be postmarked by April 15, 2006, to be valid. If you previously filed a protective claim for 2000 through 2004, only include 2005 on the claim form filed for 2005.

Please do not include the protective claim with your 2005 income tax return. Mail the claim form separately to the address indicated to ensure proper handling.

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