Slip opinion
 

NOTE: Where it is feasible, a syllabus (headnote) will
be released, as is being done in connection with this
case, at the time the opinion is issued.  The syllabus
constitutes no part of the opinion of the Court but has
been prepared by the Reporter of Decisions for the
convenience of the reader.  See United States v. Detroit
Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

          Syllabus

BARKER et al. v. KANSAS et al.
certiorari to the supreme court of kansas
No. 91-611.   Argued March 3, 1992"Decided April 21, 1992

Title 4 U.S.C. 111 authorizes the States to tax federal employees'
compensation if the taxation does not discriminate against the
employees because of the compensation's source.  After Davis v.
Michigan Dept. of Treasury, 489 U.S. 803, invalidated, under 111
and the doctrine of intergovernmental tax immunity, the Michigan
income tax imposed on the benefits of federal, but not state and
local, civil service retirees, petitioners filed suit in a Kansas
state court challenging that State's imposition of an income tax on
federal military retirement benefits but not on the benefits
received by retired state and local government employees.  In
affirming the trial court's grant of summary judgment for the state
defendants, the State Supreme Court concluded that military retire-
ment benefits constitute reduced pay for reduced current services,
in contrast to the deferred compensation for past services embodied
in state and local government retirement benefits, and that this
``significant differenc[e]'' justified the State's differential
treatment of the two classes of retirees under Davis, supra, at
816.
Held:The Kansas tax on military retirees is inconsistent with 111.
The State Supreme Court's conclusion that, for purposes of state
taxation, military retirement benefits may be characterized as
current compensation for reduced current services does not survive
analysis on several bases.  First, there are no ``significant
differences'' between military retirees and state and local govern-
ment retirees in terms of calculating retirement benefits.  The
amount of retired pay a service member receives is computed not on
the basis of the continuing duties he actually performs, but on the
basis of years served on active duty and the rank obtained prior
to retirement.  Military benefits thus are determined in a manner
very similar to that of the Kansas Public Employee Retirement
System.  Second, this Court's precedents discussing military
retirement pay provide no support for the state court's holding.
The statement in United States v. Tyler, 105 U.S. 244, 245, that
such pay is effectively indistinguishable from current compensation
at a reduced rate was made in the context of the particular holding
of that case, and cannot be taken as establishing that retirement
benefits are for all purposes the equivalent of current compensa-
tion for reduced current services.  And, although McCarty v.
McCarty, 453 U.S. 210, 222, referred to Tyler, it did not express-
ly approve Tyler's description of military retirement pay, but
specifically reserved the question whether federal law prohibits a
State from characterizing such pay as deferred compensation and
urged the States to tread with caution in this area.  Third, an
examination of other federal statutes treating military retirement
pay indicates that Congress for many purposes does not consider
such pay to be current compensation for reduced current services.
See, e. g., 10 U.S.C. 1408(c)(1); 26 U.S.C. 219(f)(1).
Thus, military retirement benefits, like the benefits paid to
Kansas government retirees, are to be considered deferred pay for
past services for purposes of 111.  Pp.3-10.
249 Kan. 186, 815 P.2d 46, reversed and remanded.

White, J., delivered the opinion for a unanimous Court.  Stevens,
J., filed a concurring opinion, in which Thomas, J., joined.

Opinion

NOTICE: This opinion is subject to formal revision
before publication in the preliminary print of the
United States Reports.  Readers are requested to notify
the Reporter of Decisions, Supreme Court of the United
States, Wash-ington, D.C. 20543, of any typographical or
other formal errors, in order that corrections may be
made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES--------
         No. 91-611
          --------
KEYTON E. BARKER and PAULINE BARKER, et
   al., PETITIONERS v. KANSAS et al.
 on writ of certiorari to the supreme
            court of kansas
           [April 21, 1992]

Justice White delivered the opinion of
the Court.
The State of Kansas taxes the benefits
received from the United States by military
retirees but does not tax the benefits
received by retired state and local govern-
ment employees.  Kan. Stat. Ann. 79-3201
et seq. (1989).  The issue before us is
whether the tax imposed on the military
retirees is inconsistent with 4
U. S. C. 111, which provides:
   ``The United States consents to the
taxation of pay or compensation for
personal service as an officer or em-
ployee of the United States, a territory
or possession or political subdivision
thereof, the government of the District
of Columbia, or an agency or instrumen-
tality of one or more of the foregoing,
by a duly constituted taxing authority
having jurisdiction, if the taxation
does not discriminate against the offi-
cer or employee because of the source of
the pay or compensation.''
Shortly after our decision in Davis v.
Michigan Dept. of Treasury, 489 U. S. 803
(1989), which invalidated under 111 the
Michigan income tax imposed on federal
civil service retirees, two class actions
were filed in Kansas District Court chal-
lenging the state income tax imposed on
military retirement benefits.  Together the
classes comprised some 14,000 military
retirees, who received federal armed forces
retirement benefits and were subject to the
Kansas income tax for one or more of the
tax years from 1984 through 1989.  The
classes also included spouses of the retir-
ees, where applicable.  Plaintiff taxpayers
sought a declaratory judgment that the
Kansas income tax discriminates against
them in favor of state and local government
retirees, in violation of 111 and the
constitutional principles of intergovern-
mental tax immunity applied in Davis.  They
also requested a permanent injunction to
prohibit assessment of the tax against
military retirees, as well as refunds of
any taxes paid by class members for the tax
years 1984 through 1989.  The District
Court granted summary judgment for the
defendants, and the Supreme Court of Kansas
affirmed.  We granted certiorari because
the holding below is arguably inconsistent
with our decision in Davis and conflicts
with decisions of other state courts of
last resort. 502 U. S.  (1991).
Our approach to deciding this case is
controlled by Davis, which invalidated a
Michigan law that imposed taxes on federal
civil service retirees' benefits but not on
benefits received by state and local gov-
ernment retirees.  In reaching that deci-
sion, we traced the history of 4
U. S. C. 111 and concluded that ``the
retention of immunity in 111 is coexten-
sive with the prohibition against discrimi-
natory taxes embodied in the modern consti-
tutional doctrine of intergovernmental tax
immunity.''  489 U. S., at 813.  Under that
doctrine, we evaluate a state tax that is
alleged to discriminate against federal
employees in favor of state employees by
inquiring ``whether the inconsistent tax
treatment is directly related to, and
justified by, `significant differences
between the two classes.''' Id., at 816
(quoting Phillips Chemical Co. v. Dumas
Independent School Dist., 361 U. S. 376,
383 (1960)).
Well aware of Davis, the State Supreme
Court undertook such an inquiry and con-
cluded that significant differences existed
between military retirees, who are taxed by
Kansas, and state and local government
retirees, who are not.  The court proceeded
to consider the State's six proffered
distinctions between military retirees and
state and local government pensioners:
   ``(1) [F]ederal military retirees
remain members of the armed forces of
the United States after they retire from
active duty; they are retired from
active duty only; (2) federal military
retirees are subject to the Uniform Code
of Military Justice (UCMJ) and may be
court martialed for offenses committed
after retirement; (3) they are subject
to restrictions on civilian employment
after retirement; (4) federal military
retirees are subject to involuntary
recall; (5) federal military retirement
benefits are not deferred compensation
but current pay for continued readiness
to return to duty; and (6) the federal
military retirement system is noncon-
tributory and funded by annual appropri-
ations from Congress; thus, all benefits
received by military retirees have never
been subject to tax.''  249 Kan. 186,
196, 815 P. 2d 46, 53 (1991).
The court deemed the first four differ-
ences significant, not because in them-
selves they justified disparate tax treat-
ment, but because they supported the fifth
distinction"that military retirement bene-
fits constitute reduced pay for reduced
current services, rather than deferred
compensation for past services.  Id., at
197, 815 P. 2d, at 53.  By contrast,
``state and local government retirement
benefits are deferred compensation,'' the
court found, and ``not current pay.''
Ibid.  The court concluded that this prin-
cipal distinction between military retirees
and state and local government retirees
justified their differential treatment
under the State's tax laws.  Accordingly,
it held that a military retiree's benefits
were as legally subject to state taxation
as the income of active military personnel,
whose pay was liable for state taxation
pursuant to the United States' consent, as
expressed in 4 U. S. C. 111.
Military retirees unquestionably remain
in the service and are subject to restric-
tions and recall; in these respects they
are different from other retirees, includ-
ing the state and local government retirees
whom Kansas does not tax.  But these dif-
ferences, standing alone, do not justify
the differential tax treatment at issue in
this case.  Nor do these differences per-
suasively indicate that, for purposes of 4
U. S. C. 111, Kansas may treat military
retirement pay as reduced pay for reduced
services.  As a general matter, a military
retiree is entitled to a stated percentage
of the pay level achieved at retirement,
multiplied by the years of creditable
service.  Brief for United States as Amicus
Curiae 11, n. 16.  In this respect, ``re-
tired [military] pay bears some of the
features of deferred compensation.  The
amount of retired pay a service member re-
ceives is calculated not on the basis of
the continuing duties he actually performs,
but on the basis of years served on active
duty and the rank obtained prior to retire-
ment.''  McCarty v. McCarty, 453 U. S. 210,
223, n. 16 (1981).  By taking into account
years of service, the formula used to
calculate retirement benefits leaves open
the possibility of creating disparities
among members of the same preretirement
rank.  Such disparities cannot be explained
on the basis of ``current pay for current
services,'' since presumably retirees
subject to these benefit differentials
would be performing the same ``services.''
Furthermore, military benefits are deter-
mined in a manner very similar to that of
the Kansas Public Employee Retirement
System.  Brief for United States as Amicus
Curiae 11, n. 16.  In terms of calculating
retirement benefits, therefore, we see no
significant differences between military
retirees and state and local government
retirees that justify disparate tax treat-
ment by the State.
In holding to the contrary, however, the
Kansas Supreme Court found support in some
of our precedents.  In United States v.
Tyler, 105 U. S. 244 (1882), for example,
the Court decided that officers retired
from active military service were entitled
to the same percentage increase in pay that
a statute had provided for active officers.
The Court reached this result in part by
characterizing military retirement pay as
 compensation [that] is continued at a
reduced rate, and the connection is contin-
ued, with a retirement from active service
only.''  Id., at 245.
The State Supreme Court also found sup-
port in McCarty, supra.  In that case the
California courts considered the appli-
cability of state community property laws
to the military retirement benefits for
which an officer who had 18 years of ser-
vice would be eligible 2 years hence.  The
California courts had held these benefits
subject to division upon dissolution of the
marriage.  In this Court the officer chal-
lenged the holding on two grounds:  first,
that his prospective retirement benefits
would be current pay, not subject to divi-
sion as deferred compensation for services
performed during the marriage; and second,
that applying the community property law to
retirement benefits conflicted with the
federal military scheme regardless of
whether retired pay is current income or
deferred compensation.  See id., at 221.
Citing and quoting Tyler, supra, our opin-
ion noted that military retirees differed
in some respects from other retired federal
personnel and that these differences had
led various courts, ``including this one,''
to opine that military retirement pay is
reduced compensation for reduced current
services.  453 U. S., at 222.  We found no
need, however, to decide ``whether federal
law prohibits a State from characterizing
retired pay as deferred compensation,''
because we sustained petitioner's alterna-
tive ground for overturning the judgment
below.  Id., at 223.
The Kansas Supreme Court reasoned that
McCarty's recognition of the Tyler holding,
as well as the decisions of several Courts
of Appeals, indicated that Tyler controlled
the description of military retirement pay.
It thus concluded that taxing military
retirement pay as current income could not
validly be characterized as discriminating
in favor of state and local government
employees, whose benefits were exempt as
being deferred compensation for past ser-
vices.  See 249 Kan., at 198, 815 P. 2d, at
54.  For several reasons, we find this
reading of our precedents unpersuasive.
First, Tyler's statement that retirement
pay is effectively indistinguishable from
current compensation at a reduced rate was
unnecessary to reach the result that Con-
gress intended to include the retirement
benefits of a certain class of retired
officers in its provision for increasing
the pay of active-duty officers.  In hold-
ing that such retired officers were eligi-
ble for this increase, the Court based its
holding on the ``uniform treatment'' of
retired and active officers in various
statutory provisions that made the retired
officers ``a part of the army'' for purpos-
es of determining eligibility for the
increase.  Tyler, 105 U. S., at 245-246.
The Court described ``a manifest difference
in the two kinds of retirement, namely,
retiring from active service and retiring
wholly and altogether from the service.''
Id., at 245.  The latter group were ineli-
gible for the pay increase because their
connection to the service had been com-
pletely terminated.  In interpreting the
applicable statutory provisions, therefore,
the ``uniform treatment'' of active-duty
and the one class of retired officers was
crucial to the decision; Tyler thus cannot
be taken as establishing that retirement
benefits are for all purposes the equiva-
lent of current compensation for reduced
current services.
Moreover, although McCarty referred to
Tyler, it did not expressly approve Tyler's
description of military retirement pay.  To
the contrary, by declining to hold that
federal law forbade the States from treat-
ing military retirement pay as deferred
income and resting our decision on another
ground, we reserved the question for anoth-
er case.  To punctuate this point, we noted
that, despite Tyler, the state courts were
divided as to whether military retirement
pay is current income or deferred compensa-
tion.  See McCarty, 453 U. S., at 222-223
nn. 15 and 16.  We also stated that al-
though military retirement pay bears some
of the features of deferred compensation,
two indicia of retired military service
include a restriction on activities and a
chance of being recalled to active duty.
Hence, ``the possibility that Congress
intended military retired pay to be in part
current compensation for those risks and
restrictions suggests that States must
tread with caution in this area, lest they
disrupt the federal scheme.'' Id., at 224,
n. 16 (emphasis added).
In urging States to be cautious in treat-
ing military retirement pay, McCarty thus
should not be read to consider Tyler as
settling the issue.  Indeed, our handling
of the community property dissolution issue
suggests the opposite.  In McCarty we said
that  [t]he community property division of
military retired pay rests on the premise
that that pay, like a typical pension,
represents deferred compensation for ser-
vices performed during the marriage.''  453
U. S., at 221.  Had we accepted as defini-
tive for all purposes Tyler's character-
ization of such pay as current income, our
decision in McCarty would have been simple
because we would have been foreclosed from
treating military retired pay as deferred
compensation.  Such a holding would have
been a much easier way of deciding McCarty
than the alternative basis for decision"-
that the application of California's commu-
nity property law conflicted with the
federal military retirement scheme.
Finding no support for the Kansas Supreme
Court's holding either in differences in
the method of calculating benefits or in
our precedents discussing military retire-
ment pay, we examine congressional intent,
as inferred through other applicable stat-
utes that treat military retirement pay.
Promptly after McCarty, for example, Con-
gress enacted the Uniformed Services Former
Spouses' Protection Act, 10 U. S. C. 1408-
(c)(1), which negated McCarty's holding by
giving the States the option of treating
military retirement pay ``either as proper-
ty solely of the member or as property of
the member and his spouse in accordance
with the law of the jurisdiction of such
court.''  Because the premise behind per-
mitting the States to apply their community
property laws to military retirement pay is
that such pay is deferred compensation for
past services, see McCarty, supra, at 221,
Congress clearly believed that payment to
military retirees is in many respects not
comparable to ordinary remuneration for
current services.  To extend to States the
option of deeming such benefits as part of
the marital estate as a matter of state law
would be inconsistent with the notion that
military retirement pay should be treated
as indistinguishable from compensation for
reduced current services.
Furthermore, both federal and Kansas
income tax law treat military retirement
pay as deferred compensation for the pur-
pose of determining deductibility of con-
tributions to an individual retirement
account (IRA).  For federal purposes, an
IRA deduction is limited to the amount of
the taxpayer's compensation or $2,000,
whichever is less.  But the term ``compens-
ation'' does not include ``any amount
received as a pension or annuity and does
not include any amount received as deferred
compensation.''  26 U. S. C. 219(f)(1).
Under this provision, military retirement
benefits are not compensation for the
purpose of making deductible contributions
to an IRA.  See generally M. Weinstein,
Mertens Law of Federal Income Taxation
25C.12, p. 58 (1988).  The State Supreme
Court in this case noted that the Kansas
tax law follows the federal scheme and does
not treat military retirement pay as cur-
rent compensation for IRA purposes, like
other types of retirement benefits.  249
Kan., at 201-202, 815 P. 2d, at 56.  The
court believed that this treatment of
military retirement pay was limited to the
IRA context, id., at 202-203, 815 P. 2d, at
57, a position we find unpersuasive.  The
court's view ignores the importance of this
provision to understanding that Congress
for many purposes does not consider mili-
tary retirement pay to be current compensa-
tion for current services.  The State's
position is weakened further by another
fact, that Kansas tax law considers mili-
tary retirement benefits as current compen-
sation under its general income tax provi-
sion but it does not for IRA deductibility
purposes.  The court asserted that ``the
distinction is not so much the character-
ization as current income or deferred
compensation, but rather active versus
passive activities required to earn the
income.''  Id., at 203, 815 P. 2d, at 57.
But as the United States persuasively
contends, ``The State's failure to treat
military retired pay consistently suggests
that the State's articulated rationale is
not in fact the basis for the disparate
treatment, but only a cloak for discrimina-
tion against federally funded benefits.''
Brief for United States as Amicus Curiae
22.
We therefore conclude that the Kansas
Supreme Court's conclusion that, for pur-
poses of state taxation, military retire-
ment benefits may be characterized as
current compensation for reduced current
services does not survive analysis in light
of the manner in which these benefits are
calculated, our prior cases, or congressio-
nal intent as expressed in other provisions
treating military retirement pay.  For
purposes of 4 U. S. C. 111, military
retirement benefits are to be considered
deferred pay for past services.  In this
respect they are not significantly differ-
ent from the benefits paid to Kansas state
and local government retirees.  According-
ly, we reverse the judgment of the Kansas
Supreme Court and remand the case for
further proceedings not inconsistent with
this opinion.
                                                    So ordered.

Concur

  SUPREME COURT OF THE UNITED STATES--------
         No. 91-611
          --------
KEYTON E. BARKER and PAULINE BARKER, et
   al., PETITIONERS v. KANSAS et al.
 on writ of certiorari to the supreme
            court of kansas
           [April 21, 1992]

Justice Stevens, with whom Justice Thomas
joins, concurring.
While I agree with the Court's explana-
tion of why this case is controlled by
Davis v. Michigan Dept. of Treasury, 489
U. S. 803 (1989), I remain convinced that
that case seriously misapplied the doctrine
of intergovernmental tax immunity.  A state
tax burden that is shared equally by feder-
al retirees and the vast majority of the
State's citizens does not discriminate
against those retirees.  See id., at 823-8-
24 (Stevens, J., dissenting).  The Federal
Government has a legitimate interest in
protecting its employees from disparate
treatment, but federal judges should not be
able to claim a tax exemption simply be-
cause a State decides to give such a bene-
fit to the members of its judiciary instead
of raising their salaries.  I write sepa-
rately to make this point because what I
regard as this Court's perverse application
of the nondiscrimination principle is
subject to review and correction by Con-
gress.  See Prudential Insurance Co. v.
Benjamin, 328 U. S. 408 (1946).
