Opinion No.
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The Honorable Bob McGinnis State Representative Route 3, Box 197 Marianna, AR 72360

Dear Representative McGinnis:

This is in response to your request for an opinion on the following question:

Can a member of the Arkansas Teacher Retirement System retire effective December 31, 1989 and not begin receiving an annuity until July 1, 1990, and still be exempt from the state income tax as provided in Arkansas Code Annotated 26-51-307?

It is my opinion that the answer to this question is "no." This conclusion is compelled by the language of A.C.A.26-51-307(b) (Supp. 1987) which states in pertinent part as follows under subsection (1):

(b) All retirement benefits, other than disability benefits, received by any resident of this state shall be exempt from the state income tax if:

(1) The recipient has retired on or before 1989.

It is my opinion that a member has not retired for purposes of 26-51-307(b) until he or she receives annuity benefits. As noted in your correspondence, A.C.A. 24-7-701(a) provides for the voluntary retirement of an active member who either is sixty (60) years old and has ten (10) years of credited service or who has thirty (30) years of credited service, regardless of age. Subsection (b) of 24-7-701 states: "Upon his retirement, he shall receive an annuity as provided for in 24-7-705." This provision indicates that retirement is equated with receipt of an annuity. Section 24-7-202, the definitional section of the Arkansas Teacher Retirement System Act, further highlights this fact wherein the term "retirant" is defined as "a former member receiving a system annuity by reason of having been a member." A.C.A. 24-7-202(20). The term "retires" is defined, moreover, as "the beginning of annuity payments to a retirant." A.C.A. 24-7-202(27).

It must also be noted that an exemption from taxation will be strictly construed against the exemption; there can be no implied exemption. C.J.C. Corp. v. Cheney, 239 Ark. 541,390 S.W.2d 437 (1965). All doubts must be resolved against the taxpayer. Qualls v. Georgia-Pacific Corp., 269 Ark. 426,602 S.W.2d 646 (1980).

These precepts further compel the conclusion that a former member of the Teacher Retirement System has not retired for purposes of the exemption contained in 26-51-307(b)(1) (Supp. 1987) until he or she receives a system annuity. If annuity benefits do not begin until July 1, 1990, the exemption will not apply.

The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elisabeth A. Walker.

Sincerely,

STEVE CLARK Attorney General

SC:arb