The plaintiffs are a substantial number of retired federal employees who have filed a declaratory judgment action seeking a refund of income taxes paid on their civil service annuity for the years 1985, 1986, 1987, and 1988. The plaintiffs contend that Virginia’s exclusion of state and local annuities from income taxation, while fully taxing federal annuities, violates 4 U.S.C. § 111 and the intergovernmental tax immunity doctrine of the Supremacy Clause of the United States Constitution. Davis v. Michigan, 109 S. Ct. 1500 (1989).
The defendant, Virginia Department of Taxation, maintains that even though the tax levied against the plaintiffs violated the United States Constitution, this case is an appropriate one for prospective application of an unprecedented court decision. Alternatively, if Davis is given retroactive application, the defendant maintains that refunds are discretionary and not mandatory.
The plaintiffs and defendants agree that there are no material facts which are genuinely in dispute. The case is before the Court on cross-motions for summary judgment.
*464The question of retroactivity is governed by the factors set forth in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971). Davis decided an issue of first impression whose resolution was not clearly foreshadowed; prospective application of Davis will not retard its operation; and retroactive application would result in inequity, injustice, and hardship. It is clear to the Court that all these factors are met in the present case.
The Court, applying the Davis decision prospectively, finds that the tax complained of was not erroneous or improper at the time it was assessed and that the plaintiffs are not entitled to the requested refunds.
Summary judgment will be entered in favor of the defendant.