[Federal Register Volume 59, Number 244 (Wednesday, December 21, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31286]
[[Page Unknown]]
[Federal Register: December 21, 1994]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[IA-50-94]
RIN 1545-AS98
Allowances Received by Members of the Armed Forces in Connection
With Moves to New Permanent Duty Stations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document contains proposed regulations relating to the
exclusion from gross income under section 61 of the Internal Revenue
Code of 1986 (Code) of certain allowances received by members of the
Armed Forces in connection with a change of permanent duty station. The
proposed regulations are required because of amendments to the law made
by section 13213(a)(1) of the Omnibus Budget Reconciliation Act of 1993
(OBRA 1993), 107 Stat. 473 (1993), which redefined the term moving
expenses under section 217(b) of the Code. Persons affected by the
proposed regulations are members of the Armed Forces.
DATES: Written comments must be delivered or mailed by March 21, 1995.
Outlines of topics to be discussed at the public hearing scheduled for
April 21, 1995, at 10 a.m. must be received by March 31, 1995.
ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (IA-50-94), room 5228,
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,
DC 20044. In the alternative, submissions may be hand delivered between
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (IA-50-94),
Courier's Desk, Internal Revenue Building, 1111 Constitution Avenue,
NW, Washington, DC. The public hearing will be held in the IRS
Auditorium, 1111 Constitution Avenue NW, Washington, DC.
FOR FURTHER INFORMATION CONTACT: Leonard H. Friedman, (202) 622-1585,
concerning the regulations; and Christina Vasquez, (202) 622-6803,
Regulations Unit, concerning submissions and the hearing. These are not
toll-free numbers.
SUPPLEMENTARY INFORMATION
Temporary Regulations and 26 U.S.C. 7805(e)(1)
In the Rules and Regulations section of this issue of the Federal
Register, the IRS is issuing temporary regulations to clarify the
treatment of certain allowances received by members of the Armed Forces
in light of changes made by OBRA 1993. Section 7805(e)(1) of the
Internal Revenue Code (Code) (26 U.S.C. 7805(e)(1)) requires the
publication of a notice of proposed rulemaking whenever the Secretary
issues temporary regulations to allow an opportunity for public
comment. The substance of the temporary regulations is reflected in the
proposed amendments to Secs. 1.61-2 and 1.217-2. The IRS intends to
revise Secs. 1.61-2 and 1.217-2 in response to taxpayers' comments on
the proposed regulations.
Background
This document contains proposed amendments to the Income Tax
Regulations (26 CFR part 1) under sections 61 and 217 of the Code that
are required because of the amendment of section 217(b) by OBRA 1993.
In Notice 94-59, 1994-1 C.B. 371, the IRS announced its intention to
issue guidance to clarify that certain allowances received by members
of the Armed Forces continue to be excludable from gross income
notwithstanding the amendment of section 217(b).
Explanation of Provisions
Section 217(g) of the Code provides that a member of the Armed
Forces on active duty who moves pursuant to a military order and
incident to a permanent change of station does not include in income
reimbursements or allowances for moving or storage expenses, or the
value of moving and storage services furnished in-kind. For purposes of
section 217(g), moving expenses are defined in section 217(b). OBRA
1993 amended section 217(b) by narrowing the definition of deductible
moving expenses.
As a result of this amendment, questions have arisen concerning the
federal tax treatment of certain allowances provided by the Department
of Defense to members of the Armed Forces (and by the Department of
Transportation to members of the Coast Guard) in connection with a
transfer to a new permanent duty station. These allowances include:
(1) a dislocation allowance, intended to partially reimburse
expenses (e.g., lease forfeitures, temporary living charges in hotels,
and breakage of household goods in transit) incurred in relocating a
household;
(2) a temporary lodging expense, intended to partially offset the
added living expenses of temporary lodging (up to 10 days) within the
United States;
(3) a temporary lodging allowance, intended to help defray higher
than normal living costs (for up to 60 days) outside the United States;
and
(4) a moving-in housing allowance, intended to defray costs (e.g.,
rental agent fees, home-security improvements, and supplemental heating
equipment) associated with occupying leased quarters outside the United
States.
Section 1.61-2(b) of the Income Tax Regulations provides, in part,
that subsistence and uniform allowances granted to members of the Armed
Forces, Coast and Geodetic Survey (now known as the National Oceanic
and Atmospheric Administration), and Public Health Service, and amounts
received by them as commutation of quarters, are to be excluded from
gross income. Similarly, the value of quarters or subsistence furnished
to such persons is excluded from gross income. These exclusions from
gross income of quarters and subsistence allowances paid to members of
the Armed Forces are ones of long-standing, dating back to 1925. See
Jones v. United States, 60 Ct. Cl. 552 (1925).
The Treasury Department and the IRS have determined that the four
above-referenced allowances provided by the Department of Defense (and
by the Department of Transportation ), to the extent not excludable
under other provisions of the Code (such as section 217(g) or section
132(g)), are to be treated as subsistence or quarters allowances.
Section 1.61-2 is proposed to be amended to provide that these
allowances are excludable from gross income. The proposed regulations
would also clarify that no deduction is allowed for any expenses
incurred in connection with a transfer to a new permanent duty station
to the extent the expenses are reimbursed by an excludable allowance.
However, any expense that meets the definition of a moving expense
as defined in section 217(b) and is not reimbursed continues to be
deductible under current law.
The regulations are proposed to be effective with respect to
allowances for expenses incurred after December 31, 1993. Allowances
for expenses incurred prior to January 1, 1994, in connection with a
transfer to a new permanent duty station are excludable under section
217(g).
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866. Therefore,
a regulatory assessment is not required. It has also been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do
not apply to these regulations, and, therefore, a Regulatory
Flexibility Analysis is not required. Pursuant to section 7805(f) of
the Internal Revenue Code, these proposed regulations will be submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on their impact on small business.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (preferably a
signed original and eight (8) copies) that are submitted timely to the
IRS. All comments will be available for public inspection and copying.
A public hearing has been scheduled for April 21, 1995, at 10 a.m.
in the IRS Auditorium, IRS Building, 1111 Constitution Avenue, NW,
Washington, DC. Because of access restrictions, visitors will not be
admitted beyond the Internal Revenue Building lobby more than 15
minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3) apply to the hearing.
Persons who wish to present oral comments at the hearing must
submit written comments by March 31, 1995, and submit an outline of the
topics to be discussed and the time to be devoted to each topic by
March 31, 1995.
A period of 10 minutes will be allotted to each person for making
comments.
An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing.
Drafting Information: The principal author of these proposed
regulations is Leonard H. Friedman, Office of Assistant Chief
Counsel (Income Tax and Accounting). However, other personnel from
the IRS and Treasury Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the proposed amendments to 26 CFR part 1 are as
follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.61-2 is amended by:
1. Removing the language ``Coast and Geodetic Survey'' from the
second sentence of paragraph (a)(1) and adding in its place the
language ``National Oceanic and Atmospheric Administration''.
2. Revising paragraph (b) to read as follows:
Sec. 1.61-2 Compensation for services, including fees, commissions,
and similar items.
* * * * *
(b) Members of the Armed Forces, National Oceanic and Atmospheric
Administration, and Public Health Service.
(1) Subsistence and uniform allowances granted commissioned
officers, chief warrant officers, warrant officers, and enlisted
personnel of the Armed Forces, National Oceanic and Atmospheric
Administration, and Public Health Service of the United States, and
amounts received by them as commutation of quarters, are to be excluded
from gross income. Similarly, the value of quarters or subsistence
furnished to such persons is to be excluded from gross income.
(2) For purposes of this section, quarters or subsistence includes
the following allowances for expenses incurred by members of the Armed
Forces after December 31, 1993, to the extent that the allowances are
not otherwise excluded from gross income under another provision of the
Internal Revenue Code: a dislocation allowance, authorized by 37 U.S.C.
407; a temporary lodging allowance, authorized by 37 U.S.C. 405; a
temporary lodging expense, authorized by 37 U.S.C. 404a; and a moving-
in housing allowance, authorized by 37 U.S.C. 405. No deduction is
allowed under this chapter for any expenses reimbursed by such
excludable allowances. For the exclusion from gross income of--
(i) Disability pensions, see section 104(a)(4) and the regulations
thereunder;
(ii) Miscellaneous items, see section 122.
(3) The per diem allowance in lieu of subsistence and the mileage
allowance received by members of the Armed Forces, National Oceanic and
Atmospheric Administration, and the Public Health Service, while in a
travel status or on temporary duty away from their permanent stations
shall be included in their gross income.
* * * * *
Par. 3. Section 1.217-2 is amended by adding paragraph (g)(6) as
follows:
Sec. 1.217-2 Deduction for moving expenses paid or incurred in taxable
years beginning after December 31, 1969.
(g) * * *
(6) No deduction is allowed under this section for any moving or
storage expense reimbursed by an allowance that is excluded from gross
income.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-31286 Filed 12-20-94; 8:45 am]
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