[Federal Register Volume 79, Number 162 (Thursday, August 21, 2014)]
[Rules and Regulations]
[Pages 49639-49657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18840]



[[Page 49639]]

Vol. 79

Thursday,

No. 162

August 21, 2014

Part III





General Services Administration





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41 CFR Parts 301-11, 302-2, 302-3, et al.





Federal Travel Regulation; Temporary Duty (TDY) Travel Allowances 
(Taxes); Relocation Allowances (Taxes); Final Rule

Federal Register / Vol. 79 , No. 162 / Thursday, August 21, 2014 / 
Rules and Regulations

[[Page 49640]]


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GENERAL SERVICES ADMINISTRATION

41 CFR Parts 301-11, 302-2, 302-3, 302-5, 302-6, 302-9, 302-15, and 
302-17

[FTR Amendment 2014-01; FTR Case 2009-307; Docket No. 2009-0013; 
Sequence No. 1]
RIN 3090-AI95


Federal Travel Regulation; Temporary Duty (TDY) Travel Allowances 
(Taxes); Relocation Allowances (Taxes)

AGENCY: Office of Government-wide Policy (OGP), U.S. General Services 
Administration (GSA).

ACTION: Final rule.

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SUMMARY: GSA is amending the Federal Travel Regulation (FTR) by 
incorporating recommendations of the Governmentwide Relocation Advisory 
Board (GRAB) concerning calculation of reimbursements for taxes on 
relocation expenses. In addition, this final rule alters the process 
for calculating reimbursements for taxes on extended temporary duty 
(TDY) benefits to correct errors and to align that process with the 
final changes to the relocation income tax process.

DATES: Effective Date: This rule is effective on September 22, 2014.
    Applicability Date: This rule is applicable for employees who 
relocate beginning January 1, 2015.

FOR FURTHER INFORMATION CONTACT: Mr. Rick Miller, Office of Government-
wide Policy (MT), U.S. General Services Administration, at 202-501-3822 
or email at rodney.miller@gsa.gov for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at 202-501-4755. Please cite FTR Amendment 2014-
01, FTR case 2009-307.

SUPPLEMENTARY INFORMATION: This final rule also responds to comments 
received as a result of the proposed rule and updates regulatory 
references in accordance with GSA's Final Rule regarding ``Relocation 
Allowances,'' published in the Federal Register on April 1, 2011.

A. Background

    The GSA Office of Government-wide Policy seeks to incorporate best 
practices from Federal agencies and the private sector into the 
policies that GSA issues. To this end, GSA created the GRAB, consisting 
of Government and private industry relocation experts, to examine 
Government relocation policy. The GRAB was chartered under the Federal 
Advisory Committee Act on July 9, 2004, and it submitted its ``Findings 
and Recommendations'' on September 15, 2005. The GRAB ``Findings and 
Recommendations'' and corresponding documents may be accessed at GSA's 
Web site at http://www.gsa.gov/grab. The GRAB made a number of 
recommendations with regard to taxes, and GSA has developed this final 
rule in response to those recommendations.
    GSA worked with the Executive Relocation Steering Committee (ERSC), 
an interagency group chartered by GSA, to analyze the GRAB 
recommendations regarding taxes. The first product of the analysis by 
the ERSC was a set of four principles:
     Substantially all--Federal agencies are required by 5 
U.S.C. 5724b to reimburse ``substantially all'' of the additional 
income taxes incurred by employees as a result of relocation and to 
reimburse ``all'' of the taxes imposed on any reimbursement for taxes.
     Fair and equitable--In personnel matters, the Government 
seeks to treat all employees fairly and equitably. A key piece of this 
is transparency. Everyone must be able to see and understand how their 
benefits are being computed. Another key piece is seeking to treat all 
civilian transferees equally, regardless of grade level.
     Relative simplicity--The tax process is necessarily 
complex because relocation has so many parts. However, it is important 
to keep this process as simple as possible, so that: (1) Agencies can 
and will perform all of the calculations accurately, (2) employees can 
verify the calculations, and (3) employees will be more likely to 
believe that they are being treated fairly and equitably.
     Minimizing cost--It is, of course, very important to 
balance the three objectives above against the overall cost of 
reimbursing employees for the taxes that they incur. It is important, 
therefore, to seek to limit reimbursement to ``substantially all'' of 
each transferee's tax liability, to the extent that this can be done 
without making the process overly complex.

B. Summary of Comments Received

    GSA extends its thanks to all the interested parties that commented 
on the proposed rule published in the Federal Register at 76 FR 32340 
on June 6, 2011.
    In response to the proposed rule, GSA received comments from seven 
different entities (4 Federal agencies, 1 provider of support and 
technical assistance, 1 relocation services company, and 1 trade 
association).[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]
    Although the comments were generally supportive as to the 
implementation of the changes to the FTR, some requested clarification 
on specific aspects of implementation time frames, processes, and the 
agency calculations for the employee taxable reimbursements. All 
comments were carefully considered in the development of this final 
rule.
    Two comments requested that GSA provide significant lead time for 
agencies and industry to update their policies, systems, and relocation 
expense management software in order to ensure a transferring 
employee's taxable reimbursements are correctly computed. It was 
further noted that to implement the final rule at the beginning of a 
tax year would assist with efficiencies and simplicity. GSA agrees, and 
therefore, this final rule will be effective at the beginning of the 
calendar year, January 1, 2015, for all relocations that report to duty 
on or after January 1, 2015, or for extended TDY trips that start on or 
after January 1, 2015, to allow for an entire tax year to be under the 
new rules.
    One comment suggested in place of the two different terms, 
Relocation Income Tax Allowance (RITA) and Extended TDY Tax 
Reimbursement Allowance (ETTRA), that a single term of Income Tax 
Reimbursement Allowance (ITRA) be used. GSA has reviewed the two 
different terms, and because they distinguish between TDY and 
relocation tax implications, GSA will not implement any changes to the 
terms at this time.
    Another comment requested that GSA consider either placing more 
severe constraints, or that GSA allow agencies to apply more severe 
constraints, on employees who submit their RITA or ETTRA claims beyond 
the required date as established by the agency. The comment also 
suggested that agencies be permitted to provide a warning upfront about 
timely payments instead of having to provide a 60-day written warning 
as specified in the new section 302-17.102. At this time, GSA has 
decided not to change the 60-day written warning as penalties, such as 
forfeiting the claim, are severe enough. If agencies can demonstrate 
that late filings are a serious problem, GSA will work with these 
agencies and the ERSC to review and modify the FTR as necessary.
    GSA received several comments suggesting that the one-year 
Relocation Income Tax Allowance (RITA) process be made mandatory. Two 
comments supported revising the proposal to make the one-year RITA 
process mandatory or at a minimum, insert a sunset clause into the 
regulation that would require

[[Page 49641]]

agencies to transition to the one-year process within a specified 
period of time. However, two agencies said they favor continuing the 
use of the two-year RITA process at this time and the other two 
agencies did not provide a comment as to preference. Even with the 
GRAB's strongest recommendation, a realization of the working 
environment of the Federal agencies tempered GSA. For a one-year RITA 
process, a number of comments stated that a year-end cutoff was 
problematic or even necessary. Specifically, one agency noted the 
length of time it would take for anyone owed a payment during the 
cutoff period to receive that payment, and the prompt payment problems 
of a cutoff period longer than 30 days. Another agency felt that 
attempting to process its volume at year end would be difficult due to 
its size, with little overall net benefit to the employee or the 
agency. GSA uses an example with a 15-day cutoff period, but it was 
noted that agencies may need a longer cutoff period to accomplish the 
necessary calculations and payment of RITA before year end. Given that 
the one-year process is optional, this will allow agencies to 
reevaluate their current processes and look at alternative ways to 
implement a one-year process.
    One alternative method suggested by a private sector commenter 
would be to continue paying relocation expenses along with the 
Withholding Tax Allowance WTA through the end of the year and 
accomplish the recalculations and RITA payments early in year two for 
those with reimbursements after some specified date. Because the 
process would not be completed within one year for those transferees 
with reimbursements after the cutoff date, the only part of the process 
remaining in year two would be calculation and payment of the RITA; 
this could presumably be accomplished before the employee had to file 
year one tax returns and pay additional taxes for that year, and in 
time for the agency to issue Forms W-2 that show the correct amount of 
withholding, and claim adjustments on its employment tax returns 
industry. While appreciated, GSA chose not to incorporate this 
suggestion into the Governmentwide regulation because it is not a one-
size-fits-all approach, meaning smaller agencies may not need this 
proposed process and larger agencies might have to wait until fairly 
late in any new year to process all payments.
    However, GSA agrees that agencies need to work towards moving away 
from the less efficient but accurate two-year process and move towards 
the more streamlined one-year process. The one-year process is similar 
to the most common processes utilized in the private sector. The GSA 
decision to make the one-year RITA process optional will remain in this 
final rule. This is an option for agencies to consider as they develop 
changes in their operations to incorporate this final rule. The two-
year process is slow and ties up funds for too long, but is more 
accurate because any mistakes in year one are corrected in year two. 
Employees need to have the ability to ask for a recalculation 
regardless of whether one or two years are used.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/HED]
    Several comments noted the lack of GSA guidance on state and local 
taxes. This final rule is not imposing any new requirements on agencies 
regarding knowledge of state and local tax laws. The current Part 302-
17 requires that the employees find and provide the applicable state 
and local marginal tax rates. In the past, GSA published state and 
Puerto Rican tax tables, but those tables were estimates. The current 
process will be more accurate if the actual rates are used instead of 
the GSA-produced tax tables, which are based on $25,000 income 
increments and therefore have inherent inaccuracies because different 
states have different tax brackets and rules. GSA is unaware of any 
agencies that currently have problems with local tax rules, including 
those for relocation, for their employees being paid through payroll 
and therefore should be able to understand the new tax processes 
related to relocation. The relationship between multiple states and 
localities as to tax payments are the employee's responsibility and 
would have to be known in order to certify their RITA claims. GSA is 
unaware as to which states or localities share reciprocity. Moreover, 
GSA does not certify the agreements between jurisdictions. Thus, there 
is no change from the regulations that are currently in place with 
regards to state and local taxes. Having GSA keep a record of reliable 
state and local tax guides as one commenter suggested is not a viable 
option due to staffing, expertise, and cost. For these reasons, GSA 
will not be able to do so.
    Two comments suggesting having the WTA cover state and local taxes. 
While this is intriguing, it cannot be done because the tax burden is 
on the employee, and ultimately it is the employee's responsibility to 
pay, even if they are reimbursed for substantially all of the WTA 
through the process.
    Two comments were received that stated that the proposed rule did 
not incorporate any way to handle alternative minimum tax, limited tax 
credits for those of certain income, and the phase outs of various tax 
credits such as the housing credits from several years ago. GSA has no 
authority to provide tax advice. This is an item that employee's will 
need to discuss with personal tax advisors.
    One commenter asked whether GSA was going to make any type of 
automated or electronic tax system available Government-wide. There are 
numerous private and interagency systems available to agencies that can 
provide this kind of service.
    Comments were also received regarding recalculations. One of the 
philosophies behind this final rule is that employees are able to make 
tax decisions using all of the applicable information available. Thus, 
the process permits agencies to make the WTA optional.
    The same philosophy results in a decision not to set a minimum such 
as $500 for disputing amounts to use as a basis for recalculations. If 
the employee is unhappy they may request a recalculation. While GSA may 
consider implementing a minimum threshold in a future change, until a 
new process is set and tested, appeals for recalculation will be 
allowed at any amount. Another commenter suggested that the WTA rules 
should not encourage employees to calculate their own WTA because this 
encourages recalculation requests. This suggestion is rejected because 
the process must remain open and transparent, as the Government intends 
to work with its employees undergoing relocations.
    Another comment received stated that the Government should only 
consider the employee's income, not the income of the spouse. It is 
GSA's position that the spouse's income must be considered, as well, 
since the Government is providing reimbursement for the relocation 
expenses of the employee's immediate family.
    GSA received a number of administrative comments, including but not 
limited to, the supporting documentation that can be requested from an 
employee in calculating taxes and a suggestion to ensure that employees 
are made aware that RITA will be paid to relevant tax authorities, as 
opposed to the entire amount being reimbursed directly to the employee. 
GSA does not believe that the final rule will be strengthened by 
specifically adding these provisions; however, agencies can consider 
these topics in internal policies. Finally, other substantive comments 
received were adopted and are addressed within the text of this final 
rule.

[[Page 49642]]

C. Major Changes in This Final Rule

    This final rule removes existing FTR Part 301-11, Subpart E, and it 
replaces FTR Part 301-11, Subpart F, which regulates taxes involved in 
extended TDY benefits. Finally this rule also completely replaces FTR 
Part 302-17.
    The major changes in This final rule are:
    Taxes on extended TDY benefits--The existing FTR Part 301-11, 
Subpart E, addresses only tax years 1993 and 1994 and is therefore 
obsolete. FTR Part 301-11, Subpart F, includes several substantial 
errors and does not agree with either the existing FTR Part 302-17 or 
this final rule. This final rule deletes FTR Part 301-11, Subpart E, 
and it replaces FTR Part 301-11, Subpart F in its entirety. This final 
rule also eliminates the lump sum process for reimbursing taxes on 
extended TDY benefits. This process is seldom used, and therefore, 
creates more confusion than benefit.[FEDREG][VOL]*[/VOL][NO]*[/
NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/
SUBJECT][/PREAMB][SUPLINF][HED]*[/HED]
    Question and answer format--This final rule puts FTR Part 302-17 
into question and answer format to conform to the remainder of the FTR. 
GSA notes that the GRAB recommended that GSA move in the other 
direction, taking all of the FTR back to its old format. GSA has 
considered and rejected this GRAB recommendation. GSA continues to 
believe that the question and answer format is easier to read and 
understand for the large majority of users.
    Eliminating use of two tables for Federal tax rates--GSA examined 
the tax tables for the past seven years and determined that the 
difference in tax rates from year to year is not large enough to 
justify formulas complex enough to account for year-to-year changes in 
Federal tax rates.
    Standardizing usage of the terms ``withholding tax allowance'' 
(WTA) and ``relocation income tax allowance'' (RITA)--The existing FTR 
Part 302-17 is not entirely clear in its use of these two terms. The 
final rule seeks to clarify these terms and, to this end, changes the 
title of FTR Part 302-17 to ``Taxes on Relocation Expenses.''
    Fraudulent claims--The existing FTR Part 302-17 includes a 
paragraph, at section 302-17.10(c), about fraudulent claims made 
against the United States, especially in the context of the ``Statement 
of Income and Tax Filing Status.'' The statutes on fraudulent claims 
remain in effect and unchanged. However, these statutes apply to the 
entire relocation process, not just reimbursement for taxes on 
relocation expenses. Therefore, GSA has added a new section to FTR Part 
302-2 to address fraudulent claims made at any point during the 
relocation reimbursement process. This new section directly mirrors 
section 301-52.12 covering fraudulent claims with regards to TDY 
benefits.
    New definitions--The final rule includes definitions for 13 terms 
in a glossary that is specific to FTR Part 302-17. Many of these terms 
are defined in the text of the existing FTR Part 302-17; the final rule 
gathers these 13 definitions into one place for easy reference in the 
new section 302-17.1.
    Limitations and Federal income tax treatments--The final rule 
provides a table in section 302-17.8 that summarizes allowances, 
limitations, and tax treatment for each relocation reimbursement, 
allowance or direct payment to a vendor provided by the FTR.
    Correcting the taxability of household goods transportation 
expenses--The existing section 302-17.3(b) states that the expenses for 
transportation of household goods (HHG) are taxable. This was true when 
the existing FTR Part 302-17 was published. However, in 1993 the IRC 
section on fringe benefits was amended to exclude from income certain 
moving expenses that are reimbursed and otherwise would be deductible. 
At the same time the IRC was amended to make fewer moving expenses 
deductible. One result was that the HHG shipment became a deductible 
expense. This inaccuracy is corrected in the final rule.
    Correcting the withholding rate for supplemental wages--The 
withholding rate of 28 percent for supplemental wages used in the 
current FTR Part 301-11, Subpart F and section 302-17.7 is incorrect. 
The correct rate is 25 percent, and this is the rate used in this final 
rule, at section 302-17.24. This rate was scheduled to revert to 28 
percent on January 1, 2011, but did not due to legislative action. If 
and when this rate changes, GSA will correct the new FTR Part 302-17 to 
reflect the rate change.
    Allowing a one-year RITA process--The GRAB's ``Findings and 
Recommendations'' clearly says that a one-year RITA process is the 
standard in the private sector because it is quicker and simpler. The 
GRAB strongly recommended that the Federal Government adopt a one-year 
process. In addition to its complexity, the existing two-year process 
for calculating taxes on relocation expenses creates a burden for many 
lower-grade transferees, because they are more likely to be required, 
in the second year, to repay an over-reimbursement in the first year. 
On the other hand, discussions with Federal agencies have made it clear 
that moving to a one-year process will be challenging, and many are 
reluctant to move in that direction. The problems are mainly due to 
systems upgrades required to change the process so radically. In 
addition, as some have noted, the two-year process does result in a 
somewhat more accurate reflection of the actual tax impact on the 
employee. Therefore, this final rule offers the one-year RITA process 
to agencies as an option, alongside the existing two-year process. It 
also includes, at new section 302-17.103, a short discussion of the 
benefits and drawbacks of the one-year and two-year processes. See also 
new sections 302-17.31 and 302-17.32, and Subparts F and G in Part 302-
17.
    Making the WTA optional--A number of Federal agencies have made the 
WTA optional to the employee. Nothing in tax law or existing 
regulations prohibits this practice, and in some cases declining the 
WTA may be advantageous to the employee. This final rule explicitly 
gives the agencies permission to make the WTA optional and provides 
guidance and explanation for the both the agency and the 
employee.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]
    Moving from earned income to taxable income--As the ERSC reviewed 
the GRAB's recommendations, it recognized that using taxable income 
(instead of earned income like the existing FTR Part 302-17), would 
provide a simpler process and would bring the taxes reimbursement 
calculation closer to the target of ``substantially all.'' Moving to 
taxable income resolves several of the issues that the GRAB raised, 
including issues with capital gains and self-employment income. See new 
sections 302-17.40, 302-17.50, and Part 302-17.63 for information on 
how taxable income is used.
    Eliminating the Government-unique tax tables--Moving to taxable 
income will also make it unnecessary for GSA to publish special tax 
tables each year. Transferees and agencies will be able to use the 
tables published by the U.S. Internal Revenue Service (IRS) and state 
and local tax authorities. With this change, agencies will be able to 
process claims as soon as the IRS issue the tables, rather than wait 
for GSA to develop unique tables based on them.
    Failure to file the ``Statement of Income and Tax Filing Status'' 
in a timely manner--The existing section 302-17.7(e)(2) makes the 
entire WTA an excess payment if the employee fails to file the 
statement or the RITA claim in a timely manner. Because the WTA is an 
advance payment on the employee's reimbursable income tax expenses, 
agencies are entitled to recover it if an employee fails to properly 
document

[[Page 49643]]

their income taxes. Therefore, this final rule continues these 
requirements on the employee and the agency, except in the case of an 
employee who declines the WTA. In this case, if the employee fails to 
file the ``Statement of Income and Tax Filing Status'' and/or the RITA 
claim in a timely manner, and in accordance with agency policy, this 
final rule allows the agency to close the file without paying the RITA. 
See new sections 302-17.53, 302-17.65, and 302-17.102.
    Recalculation of RITA--The existing FTR Part 302-17 makes no 
provision for the employee to request recalculation. Most private 
sector companies allow employees to request recalculation, at least in 
some circumstances, though the percentage of private sector employees 
who request recalculation is small. The final rule makes it possible 
for Federal employees to request recalculation, provided they filed 
and/or amended their ``Statement of Income and Tax Filing Status'' in a 
timely manner. See the new section 302-17.33.
    Agency responsibilities--The existing FTR Part 302-17 mentions some 
agency responsibilities in the context of other provisions. The final 
rule, in conformity with the rest of the FTR, lists the agency 
responsibilities together in the new Subpart H.
    Information about state and local tax laws--GSA informally 
circulated a draft version of the proposed rule to various Federal 
agencies asking for input. Several agencies objected to what they 
thought were new or additional burdens stemming from requirements to 
know and utilize state and local tax laws. However, current section 
302-17.10(b)(2) already places this requirement on agencies, stating 
``. . . it is incumbent upon the appropriate agency officials to become 
familiar with the state and local tax laws that affect their 
transferring employees.'' In short, this final rule is not imposing any 
new requirements on agencies regarding knowledge of state and local tax 
law. At the same time, this rule continues the current FTR Part 302-17 
requirement that the employee find and provide the applicable state and 
local marginal tax rates.

D. Changes to the Current FTR

    This final rule--
     Removes FTR Part 301-11, Subpart E.
     Revises FTR Part 301-11, Subpart F in its entirety.
     Adds new section 302-2.7.
     Revises one sentence in section 302-3.502(b).
     Updates references in Parts 302-2, 302-3, 302-5, 302-6, 
302-9, and 302-15; and
     Revises FTR Part 302-17 in its entirety.

E. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This final rule has not been designated a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, the rule has been reviewed by the 
Office of Management and Budget.

F. Regulatory Flexibility Act

    This final rule will not have significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. This final rule is 
also exempt from Administrative Procedure Act per 5 U.S.C. 553(a)(2), 
because it applies to agency management or personnel. However, this 
final rule is being published to provide transparency in the 
promulgation of Federal policies.

G. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FTR do not impose recordkeeping or information collection 
requirements, or the collection of information from offerors, 
contractors, or members of the public that require the approval of the 
Office of Management and Budget under 44 U.S.C. 3501, et seq.

H. Small Business Regulatory Enforcement Fairness Act[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][REGTEXT[[P]*[/P]

    This final rule is also exempt from Congressional review prescribed 
under 5 U.S.C. 801 since it relates solely to agency management and 
personnel.

List of Subjects in 41 CFR Parts 301-11, 302-2, 302-3, 302-5, 302-
6, 302-9, 302-15 and 302-17

    Government employees, Income taxes, Relocation, Travel and 
transportation expenses.

    Dated: July 28, 2014.
Dan Tangherlini,
Administrator of General Services.

    For the reasons set forth in the preamble, under 5 U.S.C. 5701-
5739, GSA is amending 41 CFR Parts 301-11, 302-2, 302-3, 302-5, 302-6, 
302-9, 302-15 and 302-17 as set forth below:

PART 301-11--PER DIEM EXPENSES

0
1. The authority for Part 301-11 continues to read as follows:

    Authority:  5 U.S.C. 5707.

Subpart E--[Removed and Reserved]

0
2. Remove and reserve Subpart E.

0
3. In subpart F, under the ``General'' heading, revise Sec. Sec.  301-
11.601 through 301-11.603 and add Sec. Sec.  301-11.605 and 301-11.605 
to read as follows:
Subpart F--Taxes on Extended TDY Benefits

General

Sec.
301-11.601 What is a taxable extended TDY assignment?
301-11.602 What factors should my agency consider in determining 
whether to authorize extended TDY?
301-11.603 What are the tax consequences of extended TDY?
301-11.604 What are the procedures for calculation and reimbursement 
of my WTA and ETTRA for taxable extended TDY?
301-11.605 When should I file my ``Statement of Income and Tax 
Filing Status'' for my taxable extended TDY assignment?
* * * * *

Subpart F--Taxes on Extended TDY Benefits

General


Sec.  301-11.601  What is a taxable extended TDY assignment?

    A taxable extended TDY assignment is a TDY assignment that 
continues for so long that, under the IRC the employee is no longer 
considered temporarily away from home during any period of employment 
if such period exceeds 1 year. You are no longer temporarily away from 
home as of the date that you and/or your agency recognize that your 
assignment will exceed one year. That is, as soon as you recognize that 
your assignment will exceed one year, you must notify your agency of 
that fact, and they must change your status immediately. Similarly, as 
soon as your agency recognizes that your assignment will exceed one 
year, your agency must notify you of that fact and change your

[[Page 49644]]

status. The effective date of this status change is the date on which 
it was recognized that you are no longer temporarily away from home as 
defined in the IRC.
    (a) If you believe that your temporary duty assignment may exceed 
one year, you should carefully study IRS Publication 463, ``Travel, 
Entertainment, Gift, and Car Expenses,'' to determine whether you are 
or will be considered ``temporarily away from home'' under this 
provision. If you are not or will not be considered temporarily away 
from home under this provision, then you are on taxable extended TDY.
    (b) The IRC makes an exception for certain Federal personnel 
involved in investigation or prosecution of a Federal crime during any 
period for which such employee is certified by the Attorney General (or 
the designee thereof) as traveling on behalf of the United States in 
temporary duty status to investigate or prosecute, or provide support 
services for the investigation or prosecution of, a Federal crime.


Sec.  301-11.602  What factors should my agency consider in determining 
whether to authorize extended TDY?

    Your agency should consider the factors discussed in Sec.  302-
3.502 of this subtitle in determining whether to authorize extended 
TDY.


Sec.  301-11.603  What are the tax consequences of extended TDY?

    (a) If you are on a taxable extended TDY assignment, then all 
allowances and reimbursements for travel expenses, plus all travel 
expenses that the Government pays directly on your behalf in connection 
with your TDY assignment, are taxable income to you. This includes all 
allowances, reimbursements, and direct payments to vendors from the day 
that you or your agency recognized that your extended TDY assignment is 
expected to exceed one year, as explained in Sec.  301-11.601.
    (b) Your agency will reimburse you for substantially all of the 
income taxes that you incur as a result of your taxable extended TDY 
assignment. This reimbursement consists of two parts:
    (1) The Withholding Tax Allowance (WTA). See Part 302-17, Subpart B 
of this Subtitle for information on the WTA; and
    (2) The ``Extended TDY Tax Reimbursement Allowance'' (ETTRA) (in 
previous editions of the FTR this was known as the ``Income Tax 
Reimbursement Allowance'').
    (c) The WTA and ETTRA for taxable extended TDY assignments cover 
only the TDY benefits described in FTR Chapter 301, Subchapter B. On an 
extended TDY assignment, you are not eligible for the other benefits 
that you would have received if your agency had permanently relocated 
you.


Sec.  301-11.604  What are the procedures for calculation and 
reimbursement of my WTA and ETTRA for taxable extended 
TDY?+[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

    (a) If your agency knows from the beginning of your TDY assignment 
that your assignment qualifies as taxable extended TDY, then your 
agency will withhold an amount as a WTA and pay that as withholding tax 
to the IRS until your extended TDY assignment ends. The WTA itself is 
taxable income to you, so your agency increases, or ``grosses-up,'' the 
amount of the WTA, using a formula to reimburse you for the additional 
taxes on the WTA.
    (b) If your agency realizes during a TDY assignment that you will 
incur taxes (because, for example, the TDY assignment has lasted, or is 
going to last, longer than originally intended), then your agency will 
compute the WTA for all taxable benefits received since the date it was 
recognized that you are no longer ``temporarily away from home'' (see 
Sec.  302-11.601 for more information on the meaning of ``temporarily 
away from home''). Your agency will pay that amount to the IRS, and 
then will begin paying WTA to the IRS until your extended TDY 
assignment ends.
    (c) For your ETTRA, your agency will use the same one-year or two-
year process that it has chosen to use for the relocation income tax 
allowance (RITA).
    (d) See part 302-17 of this subtitle for additional information on 
the WTA and RITA processes.

    Note to Sec.  301-11.604:  If your agency offers you the choice, 
the WTA is optional to you. See Sec. Sec.  302-17.61 through 302-
17.69.

Sec.  301-11.605  When should I file my ``Statement of Income and Tax 
Filing Status'' for my taxable extended TDY assignment?

    You should file your ``Statement of Income and Tax Filing Status'' 
for your taxable extended TDY assignment at the beginning of your 
extended TDY assignment, or as soon as you or your agency realizes that 
your TDY assignment will incur taxes. You should provide the same 
information as the sample ``Statements of Income and Tax Filing 
Status'' shown in part 302-17, subpart F (one-year process) or subpart 
G (two-year process) of this subtitle.

PART 302-2--EMPLOYEE ELIGIBILITY REQUIREMENTS

0
4. The authority for part 302-2 continues to read as follows:

    Authority:  5 U.S.C. 5738; 20 U.S.C. 905(a).


Sec.  302-2.3  [Amended]

0
5. Amend Sec.  302-2.3 by removing ``Sec. Sec.  302-2.7 through 30-
2.11.'' and adding ``Sec. Sec.  302-2.8 through 302-2.12'' in its 
place.


Sec. Sec.  302-2.7 through 302-2.24   [Redesignated as Sec. Sec.  302-
2.8 through 302-2.25]

0
6. Redesignate Sec. Sec.  302-2.7 through 302-2.24 as Sec. Sec.  302-
2.8 through 302-2.25, respectively.
0
7. Remove the undesignated center heading ``Time Limits'' that 
previously appeared before Sec.  302-2.7 and add it before the newly-
designated Sec.  302-2.8.

0
8. Add new Sec.  302-2.7 to read as follows:


Sec.  302-2.7  What happens if I attempt to defraud the Government?

    If you attempt to defraud the Government:
    (a) You forfeit reimbursement pursuant to 28 U.S.C. 2514; and
    (b) You may be subject under 18 U.S.C. 287 and 1001 to one, or 
both, of the following:
    (1) A fine of not more than $10,000, and/or
    (2) Imprisonment for not more than 5 years.


Sec.  302-2.9  [Amended]

0
9. Amend newly-redesignated Sec.  302-2.9 by removing ``Sec.  302-2.9 
or Sec.  302-2.10.'' and adding ``Sec.  302-2.10 or Sec.  302-2.11.'' 
in its place.


Sec.  302-2.11  [Amended]

0
10. Amend newly-redesignated Sec.  302-2.11 by removing ``302-2.8'' and 
adding ``302-2.9'' in its place wherever it appears.

0
11. Remove the undesignated center heading ``Service Agreements and 
Disclosure Statement'' that previously appeared before Sec.  302-2.12 
and add it before newly-redesignated Sec.  302-2.13.


Sec.  302-2.13  [Amended]

0
12. Amend newly-redesignated Sec.  302-2.13 by removing ``Sec.  302-
2.13, after you have relocated. A service agreement must also include 
the duplicate reimbursement disclosure statement specified in 
Sec. Sec.  302-2.20, 302-2.21, and 302-2.100(g).'' and adding ``Sec.  
302-2.14, after you have relocated. A service agreement must also 
include the duplicate reimbursement disclosure statement specified in 
Sec. Sec.  302-2.21, 302-2.22, and 302-2.100(g).'' in its place.

0
13. Remove the undesignated center heading ``Advancement of Funds'' 
that previously appeared before Sec.  302-2.20 and add it before newly-
redesignated Sec.  302-2.23.

[[Page 49645]]

Sec.  302-2.100  [Amended]

0
14. Amend Sec.  302-2.100, paragraph (g) by removing ``see Sec.  302-
2.21.'' and adding ``see Sec.  302-2.22'' in its place.


Sec.  302-2.101  [Amended]

0
15. Amend Sec.  302-2.101, paragraph (b) by removing ``Sec.  302-
2.13.'' and adding ``Sec.  302-2.14'' in its place.

PART 302-3--RELOCATION ALLOWANCE BY SPECIFIC TYPE

0
16. The authority for part 302-3 continues to read as follows:

    Authority:  5 U.S.C. 5738; 20 U.S.C. 905(a).


0
17. Amend Sec.  302-3.502, in paragraph (b), by revising the second 
sentence to read as follows:


Sec.  302-3.502  What factors should we consider in determining whether 
to authorize a TCS for a long-term assignment?

* * * * *
    (b) * * * The Withholding Tax Allowance and the Extended TDY Tax 
Reimbursement Allowance allow for the reimbursement of Federal, state, 
and local income taxes incurred as a result of taxable extended 
temporary duty assignments (see Sec. Sec.  301-11.601--301-11.605 of 
this Subtitle). * * *
* * * * *

PART 302-5--ALLOWANCE FOR HOUSEHUNTING TRIP 
EXPENSES[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

0
18. The authority for part 302-5 continues to read as follows:

    Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 11609, as 
amended, 3 CFR, 1971-1975 Comp., p. 586.


Sec.  302-5.16  [Amended]

0
19. Amend Sec.  302-5.16 by removing ``Sec. Sec.  302-2.22, 302-2.23, 
and 302-2.24.'' and adding ``Sec. Sec.  302-2.23, 302-2.24, and 302-
2.25'' in its place respectively.

PART 302-6--ALLOWANCE FOR TEMPORARY QUARTERS SUBSISTENCE EXPENSES

0
20. The authority for part 302-6 continues to read as follows:

    Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 11609, as 
amended, 3 CFR, 1971-1975 Comp., p. 586.


Sec.  302-6.15  [Amended]

0
21. Amend Sec.  302-6.15 by removing ``Sec. Sec.  302-2.22, 302-2.23, 
and 302-2.24'' and adding ``Sec. Sec.  302-2.23, 302-2.24, and 302-
2.25'' in its place respectively.


Sec.  302-6.103  [Amended]

0
22. Amend Sec.  302-6.103 by removing ``Sec.  302-2.8.'' and adding 
``Sec.  302-2.9'' in its place.

PART 302-9--ALLOWANCES FOR TRANSPORTATION AND EMERGENCY OR 
TEMPORARY STORAGE OF A PRIVATELY OWNED VEHICLE

0
23. The authority for part 302-9 continues to read as follows:

    Authority: 5 U.S.C. 5737a; 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 
11609, as amended, 3 CFR, 1971-1975 Comp., p. 586.


Sec.  302-9.12  [Amended]

0
24. Amend Sec.  302-9.12 by removing ``Sec.  302-2.22'' and adding 
``Sec.  302-2.23'' in its place.

PART 302-15--ALLOWANCE FOR PROPERTY MANAGEMENT SERVICES

0
25. The authority for part 302-15 continues to read as follows:

    Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 11609, as 
amended, 3 CFR, 1971-1975 Comp., p. 586.


Sec.  302-15.12  [Amended]

0
26. Amend Sec.  302-15.12 by removing ``Sec.  302-2.13'' and adding 
``Sec.  302-2.14'' in its place.
0
27. Revise Part 302-17 to read as follows:

PART 302-17--TAXES ON RELOCATION EXPENSES

Sec.
302-17.0 General.
Subpart A--General
302-17.1 What special terms apply to this Part?
302-17.2 Why does relocation affect personal income taxes?
302-17.3 What is the Government's objective in reimbursing the 
additional income taxes incurred as a result of a relocation?
302-17.4 Why is the reimbursement for substantially all, and not 
exactly all, of the additional income taxes incurred as a result of 
a relocation?
302-17.5 Who is eligible for the WTA and the RITA?
302-17.6 Who is not eligible for the WTA and the RITA?
302-17.7 Is there any circumstance under which the WTA and the RITA 
are not paid even though I would otherwise be eligible?
302-17.8 What limitations and Federal income tax treatments apply to 
various relocation reimbursements?
302-17.9 Who is responsible for knowing which relocation expenses 
are taxable and which expenses are nontaxable?
302-17.10 Which expenses should I report on my state tax returns if 
I am required to file returns in two different states?
302-17.11 When is an expense considered completed in a specific tax 
year?
302-17.12 Where can I find additional information and guidance on 
WTA and RITA?
302-17.13 How are taxes on extended TDY benefits and taxes on 
relocation allowances related?
Subpart B--The Withholding Tax Allowance (WTA)
302-17.20 What is the purpose of the WTA?
302-17.21 What relocation expenses does the WTA cover?
302-17.22 What relocation expenses does the WTA not cover?
302-17.23 What are the procedures for my WTA?
302-17.24 How does my agency compute my WTA?
Subpart C--The Relocation Income Tax Allowance (RITA)
302-17.30 What is the purpose of the RITA?
302-17.31 What are the procedures for calculation and payment of my 
RITA?
302-17.32 Who chooses the one-year or two-year process?
302-17.33 May I ask my agency to recalculate my RITA?
Subpart D--The Combined Marginal Tax Rate (CMTR)
302-17.40 How does my agency calculate my CMTR?
302-17.41 Is there any difference in the procedures for calculating 
the CMTR, depending on whether my agency chooses the one-year or 
two-year RITA process?
302-17.42 Which state marginal tax rate(s) does my agency use to 
calculate the CMTR if I incur tax liability in more than one state, 
and how does this affect my RITA and my state tax return(s)?
302-17.43 What local marginal tax rate(s) does my agency use?
302-17.44 What if I incur income tax liability to the Commonwealth 
of Puerto Rico?
302-17.45 What if I incur income tax liability to the Commonwealth 
of the Northern Mariana Islands or any other territory or possession 
of the United States?
Subpart E--Special Procedure If a State Treats an Expense as Taxable 
Even Though It Is Nontaxable Under the Federal IRC[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][REGTEXT[[P]*[/P]
302-17.46 What does my agency do if a state treats an expense as 
taxable even though it is nontaxable under the Federal IRC?
Subpart F--The One-Year RITA Process
302-17.50 What information should I provide to my agency to make the 
RITA calculation possible under the one-year process?
302-17.51 When should I file my ``Statement of Income and Tax Filing 
Status'' under the one-year process?
302-17.52 When should I file an amended ``Statement of Income and 
Tax Filing Status'' under the one-year process?

[[Page 49646]]

302-17.53 What happens if I do not file and amend the ``Statement of 
Income and Tax Filing Status'' in a timely manner?
302-17.54 How does my agency calculate my RITA under the one-year 
process?
302-17.55 What does my agency do once it has calculated my RITA 
under the one-year process?
302-17.56 What do I do, under the one-year process, once my agency 
has provided my W-2(s)?
Subpart G--The Two-Year RITA Process
302-17.60 How are the terms ``Year 1'' and ``Year 2'' used in the 
two-year RITA process?
302-17.61 Is the WTA optional under the two-year process?
302-17.62 What information do I put on my tax returns for Year 1 
under the two-year process?
302-17.63 What information should I provide to my agency to make the 
RITA calculation possible under the two-year process?
302-17.64 When should I file my ``Statement of Income and Tax Filing 
Status'' under the two-year process?
302-17.65 What happens if I do not file the ``Statement of Income 
and Tax Filing Status'' in a timely manner?
302-17.66 How do I claim my RITA under the two-year process?
302-17.67 How does my agency calculate my RITA under the two-year 
process?
302-17.68 What does my agency do once it has calculated my RITA 
under the two-year process?
302-17.69 How do I pay taxes on my RITA under the two-year process?
Subpart H--Agency Responsibilities
302-17.100 May we use a relocation company to comply with the 
requirements of this part?
302-17.101 What are our responsibilities with regard to taxes on 
relocation expenses?
302-17.102 What happens if an employee fails to file and/or amend a 
``Statement of Income and Tax Filing Status'' prior to the required 
date?
302-17.103 What are the advantages of choosing a 1-year or a 2-year 
RITA process?

    Authority: 5 U.S.C. 5724b; 5 U.S.C. 5738; E.O. 11609, as 
amended, 3 CFR, 1971-1975 Comp., p. 586.


Sec.  302-17.0  General.

    Use of the pronouns ``I,'' ``you,'' and their variants throughout 
this part refer to the employee, unless otherwise noted.

Subpart A--General


Sec.  302-17.1  What special terms apply to this Part?

    The following definitions apply to this part:
    Allowance means:
    (1) Money paid to the employee to cover future expenses, such as 
the miscellaneous expense allowance (see part 302-16 of this chapter 
for information about the miscellaneous expense allowance);
    (2) Money paid to the employee to cover past expenses, such as the 
relocation income tax allowance (RITA) under the two-year tax process 
described in Part 302-17, Subpart G; or
    (3) A limit established by statute or regulation, such as the 
18,000 pound net weight allowance for household goods shipments (see 
Part 302-7 of this chapter for information about the 18,000 pound net 
weight allowance).
    City means any unit of general local government as defined in 31 
CFR 215.2(b).
    Combined marginal tax rate (CMTR) means a single rate determined by 
combining the applicable marginal tax rates for Federal, state, and 
local income taxes, using the formula provided in Sec.  302-17.40. (If 
you incur liability for income tax in the Commonwealth of Puerto Rico, 
see Sec.  302-17.44.)
    County means any unit of local general government as defined in 31 
CFR 215.2(e).
    Gross-up used as a noun in this part means:
    (1) The process that your agency uses to estimate the additional 
income tax liability that you incur as a result of relocation benefits 
and taxes on those benefits; or
    (2) The result of the gross-up process.

    Note: The gross-up allows for the fact that every reimbursement 
of taxes is itself taxable. Therefore, the gross-up calculates the 
amount an agency must reimburse an employee to cover substantially 
all of the income taxes incurred as the result of a relocation.

    Internal Revenue Code (IRC) means Title 26 of the United States 
Code, which governs Federal income taxes.
    Local income tax means a tax imposed by a recognized city or county 
tax authority that is deductible for Federal income tax purposes as a 
local income tax under the IRC, at 26 U.S.C. 164(a)(3). (See the 
definitions for the terms city and county in this section.)
    Marginal tax rate (MTR) means the tax rate that applies to the last 
increment of taxable income after taxable relocation benefits have been 
added to the employee's income. For example, suppose a married employee 
who files jointly has a taxable income of $120,000. According to the 
IRS 2011 Tax Rate Schedules, taxable income between $69,000 and 
$139,350 is taxed at the 25 percent tax rate; therefore, the $120,000 
taxable income of the employee and spouse is in this range, so they 
have a 25 percent MTR. If the employee receives $30,000 of taxable 
relocation benefits, the taxable income for the employee and spouse is 
now $150,000, which is in the next highest tax bracket. In this 
example, the employee and spouse now have a Federal MTR of 28 percent 
once the taxable relocation benefits have been added to their 
income.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]
    Reimbursement means money paid to you to cover expenses that you 
have already paid for out of your own funds.
    Relocation benefits means all reimbursements and allowances that 
you receive, plus all direct payments that your agency makes on your 
behalf, in connection with your relocation.
    Relocation income tax allowance (RITA) means the payment to the 
employee to cover the difference between the withholding tax allowance 
(WTA), if any, and the actual tax liability incurred by the employee as 
a result of their taxable relocation benefits; RITA is paid whenever 
the actual tax liability exceeds the WTA.
    State means any one of the several states of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth 
of the Northern Mariana Islands, or any other territory or possession 
of the United States.
    State income tax means a tax imposed by a state tax authority that 
is deductible for Federal income tax purposes under the IRC, 
specifically 26 U.S.C. 164(a)(3).
    Withholding tax allowance (WTA) means the amount paid to the 
Federal IRS by the agency as withholding of income taxes for any 
taxable relocation allowance, reimbursement, or direct payment to a 
vendor.


Sec.  302-17.2  Why does relocation affect personal income taxes?

    When you are relocated from one permanent duty station to another, 
you are reimbursed by your employing agency for certain expenses. The 
IRC requires that you report many of these relocation benefits, 
including some that your agency pays on your behalf, as taxable income. 
When you receive taxable benefits, you must pay income tax on the 
amount or value of those benefits. However, 5 U.S.C. 5724b also 
requires that your agency reimburse you for substantially all of the 
additional Federal, state, and local income taxes you incur as a result 
of any taxable relocation benefits. A reimbursement for taxes is also a 
taxable benefit on which you must pay additional taxes.


Sec.  302-17.3  What is the Government's objective in reimbursing the 
additional income taxes incurred as a result of a relocation?

    The Government's objective is to reimburse transferred employees 
for

[[Page 49647]]

substantially all (not exactly all--see Sec.  302-17.4) of the 
additional Federal, state, and local income taxes incurred as a result 
of a relocation, including the taxes on the taxable relocation benefits 
and the taxes on the reimbursement for taxes.


Sec.  302-17.4  Why is the reimbursement for substantially all, and not 
exactly all, of the additional income taxes incurred as a result of a 
relocation?

    Because of the complexity of the calculations, which involve not 
only Federal income tax but also the income tax rates of many states 
and localities, it is not reasonable for the Government to compute the 
exact impact of relocation on an affected employee's taxes. Making a 
good faith effort to reimburse substantially all additional income 
taxes is sufficient. The statute where this appears, at 5 U.S.C. 5724b 
does not define substantially all. This Part provides the description 
through its provisions.


Sec.  302-17.5  Who is eligible for the WTA and the RITA?

    The withholding tax allowance (WTA) and the relocation income tax 
allowance (RITA) are the two allowances through which the Government 
reimburses you for substantially all of the income taxes that you incur 
as a result of your relocation. You are eligible for the WTA and the 
RITA if your agency is transferring you from one permanent duty station 
to another, in the interest of the Government, and your agency's 
reimbursements to you for relocation expenses result in you being 
liable for additional taxes.

    Note to Sec.  302-17.5: If your agency offers you the choice, 
the WTA is optional to you. See 302-17.61 through 302-17.69.

Sec.  302-17.6  Who is not eligible for the WTA and the RITA?

    You are not eligible for the WTA or the RITA if you are:
    (a) A new appointee;
    (b) Assigned under the Government Employees Training Act; or
    (c) Returning from an overseas assignment for the purpose of 
separation from Government service.


Sec.  302-17.7  Is there any circumstance under which the WTA and the 
RITA are not paid even though I would otherwise be eligible?

    If you violate the 12-month service agreement under which you are 
relocated, your agency will not pay the WTA or the RITA to you, and you 
must repay any relocation benefits paid prior to the violation.


Sec.  302-17.8  What limitations and Federal income tax treatments 
apply to various relocation reimbursements?

    (a) If you were moving yourself for a new job, with no help from 
your employer, then you probably would be able to deduct some of your 
relocation expenses. However, if you are eligible for WTA and RITA 
under this part, your Federal agency reimburses you or pays directly 
for many relocation expenses that otherwise would be deductible. Since 
you could have deducted these expenses if you had paid them yourself, 
the benefits you receive from your agency for these ``deductible'' 
relocation expenses are nontaxable. Therefore, you do not report them 
as income and you cannot take them as deductions.
    (b) However, many other relocation benefits are taxable income to 
you, the employee, because you could not have deducted them. You also 
may not deduct the additional taxes you incur, as a result of taxable 
benefits (except that you may deduct state and local income taxes on 
your Federal tax return). Your agency will reimburse you for most of 
these taxable expenses and for substantially all of the additional 
taxes that you incur as a result of the taxable 
benefits.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]
    (c) The following table summarizes the FTR allowances, limitations, 
and tax treatment of each reimbursement, allowance, or direct payment 
to a vendor. See IRS Publication 521, Moving Expenses, and the cited 
FTR paragraphs for details.

                   Table to Sec.   302-17.8--FTR Allowances and Federal Income Tax Treatments
----------------------------------------------------------------------------------------------------------------
                                            Summary of FTR
             Entitlement                      allowance           FTR Part or section         Tax treatments
----------------------------------------------------------------------------------------------------------------
Meals while en route to the new duty   The standard CONUS per   Sec.   302-4.200.......  Taxable.
 station.                               diem for meals and
                                        incidental expenses.
Lodging while en route to the new      The standard CONUS per   Sec.   302-4.200.......  Nontaxable provided the
 duty station.                          diem for lodging                                  cost is reasonable
                                        expenses for the                                  according to the IRC.
                                        employee only.
Transportation using your POV to your  Actual cost or the rate  Part 302-4.............  Nontaxable.
 new duty station.                      established by the IRS
                                        for using a POV for
                                        relocation.
Transportation to your new duty        Actual cost............  Part 302-4.............  Nontaxable.
 station using a common carrier (an
 airline, for example).
Per diem and transportation for        Actual Expense Method:   Part 302-5.............  Taxable.
 househunting trip.                     10 days of per diem
                                        plus transportation
                                        expenses--must be
                                        itemized;
                                       or.....................  Part 302-5.............  Taxable.
                                       Lump Sum Method:
                                        Locality rate times 5
                                        (one person) or times
                                        6.25 (employee and
                                        spouse) for up to 10
                                        days--no itemization
                                        required.
Temporary quarters subsistence         Actual Expense Method:   Sec.   302-6.100.......  Taxable.
 expenses (TQSE).                       Maximum of 120 days;
                                        full per diem for only
                                        the first 30 days--
                                        itemization required;
                                        or.
                                       Lump Sum Method:         Sec.   302-6.200.......  Taxable.
                                        Multiply number of
                                        days allowed by .75
                                        times the locality
                                        rate (30 days
                                        maximum)--no
                                        itemization required.

[[Page 49648]]

 
                                       Note: Additional TQSE
                                        allowances for family
                                        members are less than
                                        the benefit for the
                                        employee occupying TQ
                                        alone.
Shipment of household goods (HHG) to   Transportation of up to  Part 302-7.............  Transportation of goods
 include unaccompanied air baggage      18,000 pounds.                                    from your former
 (UAB) and professional books,                                                            residence to your new
 papers, and equipment (PBP&E).                                                           residence is
                                                                                          nontaxable.
Temporary storage of household goods   Temporary storage of up  Sec.   302-7.9.........  Nontaxable.
 in transit, as long as the expenses    to 30 days (However,
 are incurred within any 30 calendar    see the section
 day period after the day your items    immediately below).
 are removed from your old residence
 and before they are delivered to the
 new residence.
Temporary storage of household goods   Temporary storage of 60  Sec.   302-7.9.........  Taxable.
 beyond 30 days.                        plus 90 days, NTE 150
                                        days for CONUS
                                        relocations, and 90
                                        days plus another 90
                                        days, NTE 180 for
                                        OCONUS relocations.
Extended storage of Household Goods    CONUS--TCS (per agency   Sec.   302-3.414; Part   Taxable.
 (HHG).                                 policy) or isolated      302-8, Subpart B.
                                        duty station only.
                                       OCONUS--Agency policy..  Part 302-8, Subparts C   Nontaxable.
                                                                 and D.
Transportation of privately-owned      CONUS--Agency            Part 302-9, Subpart D..  Nontaxable.
 vehicle (POV).                         discretion.
                                       OCONUS--Agency           Part 302-9, Subparts B   Nontaxable.
                                        discretion.              & C.
Shipment of mobile home in lieu of     Limited to maximum       Sec.   302-10.3........  Nontaxable.
 HHG.                                   allowance for HHG.
Residence transactions:..............
    [ssquf] Sale of home.............  Closing costs up to 10%  Sec.   302-11.300(a)...  Taxable.
                                        of actual sales price.
    [ssquf] Purchase of home.........  Closing costs up to 5%   Sec.   302-11.300(b)...  Taxable.
                                        of actual purchase
                                        price.
    [ssquf] Lease-breaking...........  Itemization required...  Sec.  Sec.   302-11.430  Taxable.
                                                                 & 431.
Payments to Relocation Service         According to agency      Part 302-12............  Taxability determined
 Contractors.                           policy and contracts.                             on a case-by-case
                                                                                          basis.
Home Marketing Incentive Payment.....  See internal agency      Part 302-14............  Taxable, but not
                                        policies and                                      eligible for WTA or
                                        regulations.                                      RITA.
Property Management Services.........  See internal agency      Part 302-15............  Taxable.
                                        policies and
                                        regulations.
Miscellaneous expenses...............  $650 or $1,300; or.....  Sec.   302-16.102......  Taxable.
                                       Maximum of 1 or 2 weeks  Sec.   302-16.103......  Taxable.
                                        basic pay.
Withholding tax allowance............  25 percent of            Part 302-17, Subpart B.  Taxable.
                                        reimbursements,
                                        allowances, and direct
                                        payments to vendors.
Relocation income tax allowance......  Based on income and tax  Part 302-17, Subpart C.  Taxable.
                                        filing status.
----------------------------------------------------------------------------------------------------------------

                                                                                                [FEDREG][VOL]*[/
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Sec.  302-17.9  Who is responsible for knowing which relocation 
expenses are taxable and which expenses are nontaxable?

    Both you and your agency must know which reimbursements and direct 
payments to vendors are taxable and which are nontaxable in your 
specific circumstances. When you submit a voucher for reimbursement, 
your agency must determine whether the reimbursement is taxable income 
at the Federal, state, and/or local level. Then, when you file your 
income tax returns, you must report the taxable allowances, 
reimbursements, and direct payments to vendors as income. Your agency 
is ultimately responsible for calculating and reporting withholding 
accurately and you are ultimately responsible for filing your taxes 
correctly.


Sec.  302-17.10  Which expenses should I report on my state tax returns 
if I am required to file returns in two different states?

    In most cases, your state tax return for the state you are leaving 
should reflect your reimbursement or allowance, if any, for 
househunting expenses and your reimbursement or direct payments to 
vendors for real estate expenses at the home you are leaving. All other 
taxable expenses should be shown as income on the tax return you file 
in the state into which you have moved. However, you and your agency 
must carefully study the rules in both states and include everything 
that each state considers to be income on each of your state tax 
returns.


Sec.  302-17.11  When is an expense considered completed in a specific 
tax year?

    A reimbursement, allowance, or direct payment to a vendor is 
considered completed in a specific tax year only if the money was 
actually disbursed to the

[[Page 49649]]

employee or vendor during the tax year in question.


Sec.  302-17.12  Where can I find additional information and guidance 
on WTA and RITA?

    To find additional information and guidance on WTA and RITA, see:
    (a) IRS Publication 521, Moving Expenses; and
    (b) FTR Bulletins; GSA publishes additional information on RITA, 
including the illustrations and examples of various RITA computations, 
in FTR Bulletins which are updated as necessary. The current GSA FTR 
Bulletins may be found at http://www.gsa.gov/bulletins.


Sec.  302-17.13  How are taxes on extended TDY benefits and taxes on 
relocation allowances related?

    (a) Taxes on extended TDY benefits are computed using exactly the 
same processes described in this Part for the WTA and RITA except that:
    (1) The tax process for extended TDY benefits uses the term 
``withholding tax allowance'' (WTA) in exactly the same fashion as the 
process for taxes on relocation allowances; however, in place of the 
term ``relocation income tax allowance,'' the tax process for extended 
TDY benefits uses the term ``extended TDY tax reimbursement allowance'' 
(ETTRA); and
    (2) All benefits are taxable under extended TDY, so the sections of 
this Part that discuss which benefits are taxable and which are not 
have no relevance to ETTRA.
    (b) See Part 301-11, Subpart F of this Title for additional 
information about taxes on extended TDY benefits.

Subpart B--The Withholding Tax Allowance (WTA)


Sec.  302-17.20  What is the purpose of the WTA?

    The purpose of the WTA is to protect you from having to use part of 
your relocation expense reimbursements to pay Federal income tax 
withholding; it does not cover state taxes, local taxes, Medicare 
taxes, or Social Security taxes (see Sec.  302-17.22(c) and (d)).

    Note to Sec.  302-17.20: If your agency offers you the choice, 
the WTA is optional to you. See Sec. Sec.  302-17.61 through 302-
17.69.

Sec.  302-17.21  What relocation expenses does the WTA cover?

    The WTA covers certain allowances, reimbursements, and/or direct 
payments to vendors, to the extent that each of them is taxable income. 
It does not cover any allowance, reimbursement, or direct payment to a 
vendor that is nontaxable; that is, your agency will not give you a WTA 
for anything that is not considered taxable income to you (see Table 1 
in Sec.  302-17.8 for a summary of tax treatment). In particular, the 
WTA covers:
    (a) En route meals and incidental expenses--Reimbursements for 
meals and incidental expenses while en route are taxable and, 
therefore, are covered by the WTA.
    (b) One Househunting trip--Travel (including per diem and 
transportation) expenses for you (and your spouse) for one round trip 
to the new official station to seek permanent residence quarters. 
Househunting is covered regardless of whether it is reimbursed under 
the actual expense or lump sum method. (See Part 302-5 of this 
chapter.)
    (c) Temporary quarters--Subsistence expenses for you and your 
immediate family during occupancy of temporary quarters. Temporary 
quarters are covered regardless of whether it is reimbursed under the 
actual expense or lump sum method. (See Part 302-6 of this chapter.)
    (d) Extended storage expenses--Extended storage for a temporary 
change of station in CONUS or assignment to an isolated duty station in 
CONUS, but only if these expenses are allowed by Part 302-8 of this 
chapter and your agency's policy.
    (e) Real estate expenses--Expenses for the sale of the residence at 
your old official station and purchase of a home at your new official 
station. This can also include expenses for settling an unexpired lease 
(``breaking'' a lease) at your old official station. (See Part 302-11 
of this chapter. If you do not hold full title to the home you are 
selling or buying, see Sec.  302-11.7 of this chapter.)
    (f) Expenses paid by a relocation company to the extent such 
payments constitute taxable income to the employee. The extent to which 
such payments constitute taxable income varies according to the 
individual circumstances of your relocation, and by the state and 
locality in which you reside. (See IRS Publication 521, Moving 
Expenses, and appropriate state and local tax authorities for 
additional information.)
    (g) Property Management Services--Payment for the services of a 
property manager for renting rather than selling a residence at your 
old official station. (See Part 302-15 of this chapter.)
    (h) Miscellaneous expense allowance--Miscellaneous expenses for 
defraying certain relocation expenses not covered by other relocation 
benefits. (See Part 302-16 of this chapter.)


Sec.  302-17.22  What relocation expenses does the WTA not cover?

    The WTA does not cover the following relocation expenses:
    (a) Any reimbursement, allowance, or direct payment to a vendor 
that should not be reported as taxable income when you file your 
Federal tax return; this includes but is not limited to en route 
lodging and transportation, HHG transportation, and transportation of 
POVs.
    (b) Reimbursed expenses for extended storage of household goods 
during an OCONUS assignment, if reimbursement is permitted under your 
agency's policy.
    (c) State and local withholding tax obligations. To the extent that 
your state or local tax authority requires periodic (such as quarterly) 
tax payments, you are responsible to pay these from your own funds. 
Your agency reimburses you for substantially all of these payments 
through the RITA process, but your agency does not provide a WTA for 
them. If required to by state or local law, your agency may withhold 
these from your reimbursement.
    (d) Additional taxes due under the Federal Insurance Contributions 
Act including Social Security tax, if applicable, and Medicare tax. 
Current law does not allow Federal agencies to reimburse transferees 
for these employment taxes on relocation benefits. However, your agency 
will deduct for these taxes from your reimbursements for taxable items.
    (e) Any reimbursement amount that exceeds the actual expense paid 
or incurred. For example, if your reimbursement for the movement of 
household goods is based on the commuted rate schedule but your actual 
relocation expenses are less than that, your tax liability for the 
difference is not covered by the WTA or RITA.
    (f) Home marketing incentive payment. In accordance with FTR part 
302-14, your agency may not provide you either a WTA or RITA for this 
incentive.
    (g) Any recruitment, relocation, or retention incentive payment 
that you receive. Any withholding of taxes for such payments is outside 
the scope of this regulation. Rather, it is covered by regulations 
issued by the Office of Personnel Management, Treasury's Financial 
Management Service, and the IRS.
    (h) Any allowances, reimbursements, and/or direct payments to 
vendors not related to your relocation; for example, a reimbursement 
for office supplies would not be covered by the WTA, even if it 
occurred during your relocation.

[[Page 49650]]

Sec.  302-17.23  What are the procedures for my WTA?

    (a) Your agency prepares a relocation travel authorization, which 
includes an estimate of the WTA and RITA, to obligate funds for your 
relocation.
    (b) Your agency pays certain allowances to you. Your agency also 
pays vendors directly for other relocation expenses.
    (c) Your agency instructs you as to whether to submit one voucher 
after you have completed your relocation or to submit vouchers at 
various points as your relocation progresses plus another when your 
relocation is completed.
    (d) You submit your voucher(s) for reimbursement of certain 
relocation expenses.
    (e) Your agency determines the extent to which each allowance, each 
item on your voucher(s), and each direct payment to a vendor is 
nontaxable or is taxable income to you under the IRC.
    (f) For the taxable items, your agency calculates your WTA and any 
reimbursement(s) due to you in accordance with Sec.  302-17.24. Your 
agency sets aside the amount of your WTA and pays the IRS as a 
withholding tax in accordance with IRS requirements.


Sec.  302-17.24  How does my agency compute my WTA?

    (a) Your agency computes your WTA by applying the grossed-up 
withholding formula below each time your agency incurs a covered, 
taxable relocation expense, regardless of whether it is a 
reimbursement, allowance, or direct payment to a 
vendor.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]
    (b) The law currently provides for a withholding rate of 25 percent 
for ``supplemental wages'' that are identified separately from regular 
wages (This rate has not always been 25 percent and may change in the 
future; GSA will revise the FTR to reflect any changes as quickly as 
possible, but users of this part should see IRS Publication 15, 
Employer's Tax Guide, for the most current rate). Taxable payments for 
relocation expenses are ``supplemental wages,'' as defined in IRS 
Publication 15. However, you owe taxes on the WTA itself because, like 
most other relocation allowances, it is taxable income. To reimburse 
you for the taxes on the WTA itself, your agency computes the WTA by 
multiplying the reimbursement, allowance, or direct payment to a vendor 
by 0.3333 instead of 0.25. That is:

WTA = R/(1-R) x Expense

where R is the withholding rate for supplemental wages, or

WTA = 0.25/(1-0.25) x Expense, or 0.3333 x Expense

    Example 1 to Part 302-17: Calculating the Withholding Tax 
Allowance (WTA)
Househunting Trip Actual Expense Claim--$3,000
WTA = .3333 x $3,000 = $999.90
Temporary Quarters Lump Sum Allowance--$5,000
WTA = .3333 x $5,000 = $1,666.50
Total WTA $999.90 + $1,666.50 = $2,666.40

    Note to Sec.  302-17.24: Your agency must deduct withholding for 
Medicare and FICA (Social Security) from your reimbursement for 
expenses such as househunting, as the WTA does not cover such 
expenses.

Subpart C--The Relocation Income Tax Allowance (RITA)


Sec.  302-17.30  What is the purpose of the RITA?

    (a) The purpose of the RITA is to reimburse you for any taxes that 
you owe that were not adequately reimbursed by the WTA. As discussed in 
Sec.  302-17.24, the WTA calculation is based on the 25 percent income 
tax withholding rate applicable to supplemental wages. This may be 
higher or lower than your actual tax rate. The RITA, on the other hand, 
is based on your marginal tax rate, determined by your actual taxable 
income and filing status, which allows your agency to reimburse you for 
substantially all of your Federal income taxes. The RITA also 
reimburses you for any additional state and local taxes that you incur 
as a result of your relocation, because they are not reimbursed in the 
WTA process.
    (b) The WTA may be optional to you. See Sec.  302-17.61 for a 
discussion of criteria for choosing whether or not to accept the WTA. 
See Sec. Sec.  302-17.62 through 302-17.69 for procedures if you choose 
not to accept the WTA.


Sec.  302-17.31  What are the procedures for calculation and payment of 
my RITA?

    The procedures for the calculation and payment of your RITA depend 
on whether your agency has chosen to use a one-year or two-year RITA 
process. See Subpart F for the one-year process and Subpart G for the 
two-year process.


Sec.  302-17.32  Who chooses the one-year or two-year process?

    Your agency or a major component of your agency determines whether 
it will adopt a one-year or two-year RITA process. Your agency may use 
the one-year RITA process for one or more specific categories of 
employees and the two-year process for one or more other categories.


Sec.  302-17.33  May I ask my agency to recalculate my RITA?

    (a) Yes, you may ask your agency to recalculate your RITA provided 
you filed your ``Statement of Income and Tax Filing Status,'' and 
amended it, if necessary, in a timely manner. If, once you have 
completed all Federal, state, and local tax returns, you believe that 
your RITA should have been significantly different from the RITA that 
your agency calculated, you may ask your agency to recalculate your 
RITA. This is true for either the one-year or two-year process. With 
any request for recalculation, you must submit a statement explaining 
why you believe your RITA was incorrect.
    (b) Please note that your agency may require that you also submit 
an amended ``Statement of Income and Tax Filing Status'' (if, for 
example, you inadvertently did not report some of your income in your 
original Statement), your actual tax returns, or both, as attachments 
to your request for recalculation.

    Note to Sec.  302-17.33: Please see Sec.  302-17.55, if your 
agency uses a one-year RITA process, or Sec.  302-17.68, if your 
agency uses a two-year RITA process, for more information about 
positive and negative RITA calculations.

Subpart D--The Combined Marginal Tax Rate (CMTR)


Sec.  302-17.40  How does my agency calculate my CMTR?

    (a) The CMTR is a key element that greatly enhances the accuracy of 
the calculation of your RITA. Your agency uses the information on your 
``Statement of Income and Tax Filing Status,'' as amended, to determine 
your CMTR, as follows (see Subparts F and G of this Part for 
information about the ``Statement of Income and Tax Filing 
Status'').[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]
    (b) The CMTR is, in essence, a combination of your Federal, state, 
and local tax rates. However, the CMTR cannot be calculated by merely 
adding the Federal, state, and local marginal tax rates together 
because of the deductibility of state and local income taxes from 
income on your Federal income tax return. The formula prescribed below 
for calculating the CMTR, therefore, is designed to adjust the state 
and local tax rates to compensate for their deductibility from income 
for Federal tax purposes.
    (c) The formula for calculating the CMTR is:

    CMTR = F + (1-F)S + (1-F)L

Where:

F = Your Federal marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any


    Example 2 to Part 302-17: Calculating the Combined Marginal Tax 
Rate

[[Page 49651]]

Federal marginal tax rate--33%
State marginal tax rate--6%
Local marginal tax rate--3%
CMTR = 0.33 + (1.00 - 0.33)(.06) + (1.00 - 0.33)(0.03) = .3903 or 
39.03%

    (d) Your agency finds the Federal marginal tax rate by comparing 
your taxable income, as shown in your ``Statement of Income and Filing 
Status,'' to the Federal tax tables in the current year's Form 1040-ES 
instructions (see Sec. Sec.  302-17.50--302-17.53 and Sec. Sec.  302-
17.63--302-17.65 for additional information on the ``Statement of 
Income and Tax Filing Status'').
    (e) Your agency finds the state and local marginal tax rates that 
apply to you (if any) by comparing your taxable income to the most 
current state and/or local tax tables provided by the states and 
localities. Every Federal payroll office and every provider of tax 
calculation software has these tables readily available, and the tables 
are also available on the Web sites of the various state and local 
taxing authorities.


Sec.  302-17.41  Is there any difference in the procedures for 
calculating the CMTR, depending on whether my agency chooses the one-
year or two-year RITA process?

    No. The procedures for calculating the CMTR are the same for the 
one-year and two-year RITA processes.


Sec.  302-17.42  Which state marginal tax rate(s) does my agency use to 
calculate the CMTR if I incur tax liability in more than one state, and 
how does this affect my RITA and my state tax return(s)?

    If two or more states that are involved in your relocation impose 
an income tax on relocation benefits, then your relocation benefits may 
be taxed by both states. Most commonly, your old and new duty stations 
are in the two states involved. The following table lays out the 
possibilities:[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

----------------------------------------------------------------------------------------------------------------
                                                       Your agency will
                                                       use the following    Your RITA will
               If:                       But:            as the state         include an         Your action:
                                                       marginal tax rate      appropriate
                                                         in the CMTR:       allowance for:
----------------------------------------------------------------------------------------------------------------
Only one involved state has a                         The marginal tax    Taxes you incur in  You pay the taxes
 state income tax.                                     rate of the one     that state.         required by the
                                                       state that taxes                        state that taxes
                                                       income.                                 income.
Each involved state taxes a                           The average of the  Taxes you incur in  You file tax
 different set of your                                 marginal tax        all involved        returns in each
 relocation benefits, with no                          rates for each      states.             involved state
 overlap.                                              state involved.                         and pay the
                                                                                               applicable taxes.
Two or more involved states tax   All involved        The marginal tax    Taxes you incur in  You file tax
 some of your same relocation      states allow you    rate of the state   all involved        returns in each
 benefits.                         to adjust or take   that has the        states.             involved state,
                                   a credit for        highest state                           take the
                                   income taxes paid   income tax rate.                        appropriate
                                   to other states.                                            credits and/or
                                                                                               adjustments, and
                                                                                               pay the
                                                                                               applicable taxes.
Two or more involved states tax   One or more         The sum of all      Taxes you incur in  You file tax
 some of the same relocation       involved states     applicable state    all involved        returns in each
 benefits.                         does not allow      marginal tax        states.             involved state,
                                   you to adjust or    rates.                                  and pay the
                                   take a credit for                                           applicable taxes.
                                   income taxes paid                                           This may result
                                   to other states.                                            in paying taxes
                                                                                               in more than one
                                                                                               state on the same
                                                                                               relocation
                                                                                               benefits.
----------------------------------------------------------------------------------------------------------------

Sec.  302-17.43  What local marginal tax rate(s) does my agency use?

    (a) If you incur local tax liability, you provide the applicable 
marginal tax rate(s) on your ``Statement of Income and Tax Filing 
Status''. Your agency validates the applicable local marginal tax 
rate(s) and uses it (them) in the CMTR formula. [FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][REGTEXT[[P]*[/P]
    (b) If you incur local income tax liability in more than one 
locality, then your agency should follow the rules described for state 
income taxes in Sec.  302-17.42 to calculate the local marginal tax 
rate that will be used in the CMTR formula and to compute your RITA, 
and you should follow the rules in Sec.  302-17.42 to determine your 
actions.
    (c) If a locality in which you incur income tax liability publishes 
its tax rates in terms of a percentage of your Federal or state taxes, 
then your agency must convert that tax rate to a percentage of your 
income to use it in computing your CMTR. This is accomplished by 
multiplying the applicable Federal or state tax rate by the applicable 
local tax rate. For example, if the state marginal tax rate is 6 
percent and the local tax rate is 50 percent of state income tax 
liability, the local marginal tax rate stated as a percentage of 
taxable income would be 3 percent.


Sec.  302-17.44  What if I incur income tax liability to the 
Commonwealth of Puerto Rico?

    A Federal employee who is relocated to or from a point, or between 
points, in the Commonwealth of Puerto Rico may be subject to income tax 
by both the Federal Government and the government of Puerto Rico. 
However, under current Puerto Rico law, an employee receives a credit 
on his/her Puerto Rico income tax for the amount of taxes paid to the 
Federal Government. Therefore:
    (a) If the applicable Puerto Rico marginal tax rate, as shown in 
the tables provided by the Commonwealth of Puerto Rico, is equal to or 
lower than the applicable Federal marginal tax rate, then your agency 
uses the Federal marginal tax rates and the formula in Sec.  302-
17.40(c) in calculating your CMTR.
    (b) If the applicable Puerto Rico marginal tax rate, as shown in 
the tables provided by the Commonwealth of Puerto Rico, is higher than 
the applicable Federal marginal tax rate, and if all of the states 
involved either have no income tax or allow an adjustment or credit for 
income taxes paid to the other state(s) and Puerto Rico, then your 
agency uses the rate for Puerto Rico in place of the Federal marginal 
tax rate in the formula in Sec.  302-17.40(c).
    (c) If the applicable Puerto Rico marginal tax rate, as shown in 
the tables provided by the Commonwealth of

[[Page 49652]]

Puerto Rico, is higher than the applicable Federal marginal tax rate 
and one or more of the state(s) involved does not allow an adjustment 
or credit for income taxes paid to the other state(s) and/or Puerto 
Rico, then your agency uses the formula below:

CMTR = P + S + L

Where:

P = Your Puerto Rico marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any


Sec.  302-17.45  What if I incur income tax liability to the 
Commonwealth of the Northern Mariana Islands or any other territory or 
possession of the United States?

    If you are relocated to, from, or within the Commonwealth of the 
Northern Mariana Islands or any territory or possession of the United 
States that is covered by the definition in Sec.  302-17.1, your agency 
will have to determine the tax rules of that locality and then include 
those taxes in your RITA calculation, as applicable.

Subpart E--Special Procedure If a State Treats an Expense as 
Taxable Even Though It Is Nontaxable Under the Federal IRC


Sec.  302-17.46  What does my agency do if a state treats an expense as 
taxable even though it is nontaxable under the Federal IRC?

    If one or more of the states where you have incurred tax liability 
for relocation expenses treats one or more relocation expenses as 
taxable, even though it (they) are nontaxable under Federal tax rules, 
you may be required to pay additional state income tax when you file 
tax returns with those states. In this case, your agency calculates a 
state gross-up to cover the additional tax liability resulting from the 
covered relocation expense reimbursement(s) that are nontaxable under 
Federal, but not state tax rules. Your agency calculates the state 
gross-up and then adds that amount to your RITA. Your agency will use 
this formula to calculate the state gross-up:
[GRAPHIC] [TIFF OMITTED] TR21AU14.005

F = Federal Marginal Tax Rate
S = State Marginal Tax Rate
C = CMTR
N = Dollar amount of covered relocation expenses that are nontaxable 
under Federal tax rules but are taxable under state tax rules


All information, except ``N,'' can be found in previous calculations 
(if moving to, from, or within Puerto Rico, follow the rules in 302-
17.44 to determine when to substitute ``P'' for ``F'').

    ``N'' is determined as follows:
    1. Take the dollar amount of reimbursements, allowances, and direct 
payments to vendors treated as nontaxable under Federal tax rules.
    2. Subtract the dollar amount of reimbursements, allowances, and 
direct payments to vendors treated as nontaxable by the state.
    3. The difference represents ``N.''

    Note to Sec.  302-17.46: This calculation is the same, 
regardless of whether your agency has chosen to use the one-year or 
two-year RITA process.

[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]Subpart F--The One-
Year RITA Process


Sec.  302-17.50  What information should I provide to my agency to make 
the RITA calculation possible under the one-year process?

    You should provide the information required in the ``Statement of 
Income and Tax Filing Status'' as follows:

       Statement of Income and Tax Filing Status--One-Year Process
 
 
 
The following information, which my agency will use in calculating the
 RITA to which I am entitled, was shown on the Federal, state, and local
 income tax returns that I (or my spouse and I) filed for the 20 --------
  tax year (this should be the most recent year in which you filed).
 
Federal Filing status:
[ballot] Single........................  [ballot] Head of Household
[ballot] Married Filing Jointly........  [ballot] Qualifying Widow(er)
[ballot] Married Filing Separately.....
 
(a) Taxable income as shown on my (our) IRS Form 1040: $ ----------------
 
 
Significant future changes in income (including cost of living raises)
 that you can foresee for the current year:
----Increase ----Decrease ----No Foreseeable Changes
 
(b) Approximate net amount of this (these) change(s): $ ----------------
 
(c) Predicted taxable income for the current tax year 20 -------- = Sum
 of (a) and (b) = $ ----------------
 
State you are moving out of: ----------------
 
Filing status for the state moving out of: ----------------
 
Marginal Tax Rate: --------%
 
State you are moving into: ----------------
 
Filing status for the state moving into: ----------------
 
Marginal Tax Rate: --------%
 
Locality you are moving out of: ----------------
 
Filing status for the locality moving out of: ----------------
 
Marginal Tax Rate: --------%
 
Locality you are moving into: --------
 
Filing status for the locality moving into: ----------------
 
Marginal Tax Rate: --------%
 
The above information is true and accurate to the best of my (our)
 knowledge. I (we) agree to notify the appropriate agency official of
 any significant changes to the above so that appropriate adjustments to
 the RITA can be made.
 

[[Page 49653]]

 
------------------------------------     --------------------
Employee's signature                     Date
 
------------------------------------     --------------------
Spouse's signature (if filing jointly)   Date
 

Sec.  302-17.51  When should I file my ``Statement of Income and Tax 
Filing Status'' under the one-year process?

    For the one-year process, you should file this form as soon as you 
receive your relocation orders, or as soon as you file your tax returns 
for the most recent tax year, whichever occurs later.


Sec.  302-17.52  When should I file an amended ``Statement of Income 
and Tax Filing Status'' under the one-year process?

    You should submit an amended ``Statement of Income and Tax Filing 
Status'' to your agency under the one-year process whenever the 
information on it changes, and you should continue to amend it until 
you have received the last W-2 from your agency in connection with a 
specific relocation. In particular, you should file an amended version 
of this statement whenever:
    (a) Your filing status changes;
    (b) Your income changes enough that your income, including WTA and 
RITA, might put you into a different tax bracket; or
    (c) You have taxable relocation expenses in a second or third 
calendar year. [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

    Note to Sec.  302-17.52: Your agency will not be able to use 
your original or amended ``Statement of Income and Tax Filing 
Status'' if you file it after the cut-off date established by your 
agency in accordance with Sec.  302-17.54(b).

Sec.  302-17.53  What happens if I do not file and amend the 
``Statement of Income and Tax Filing Status'' in a timely manner?

    If you don't file the ``Statement of Income and Tax Filing Status'' 
and/or amend it when necessary, your agency will switch to the 2-year 
process, and because the WTA is an advance of your income tax expenses, 
you will be liable to repay the full amount of the WTA that your agency 
has paid to the IRS. See Subpart G of this Part.


Sec.  302-17.54  How does my agency calculate my RITA under the one-
year process?

    (a) Your agency provides allowances to you, reimburses you for 
vouchers that you submit, and pays certain relocation vendors directly, 
all during the calendar year as described in Subpart B of this Part. 
Some of these reimbursements, allowances, and direct payments to 
vendors are taxable income to you, the employee, as described in 
subpart A of this part. Your agency computes a WTA and reports the WTA 
to the IRS as taxes withheld for you for each of these taxable 
reimbursements, allowances, and direct payments to vendors. The WTA may 
be optional to you. However, if your agency is using a one-year RITA 
process, there is no advantage to you in choosing not to receive the 
WTA, because your agency will adjust the WTA payment to the IRS. See 
Sec.  302-17.55(a)(1).
    (b) Your agency establishes a cutoff date (for example, December 
1), after which it will not issue reimbursements or allowances to you 
or make direct payments to relocation vendors for the rest of the 
calendar year.
    (c) If the information on your ``Statement of Income and Tax Filing 
Status'' changes after you have submitted the initial version, you must 
submit an amended ``Statement of Income and Tax Filing Status'' no 
later than your agency's cutoff date.
    (d) During the period between the cutoff date and the end of the 
calendar year, your agency calculates your RITA.
    (e) Your RITA is itself taxable income to you. To account for taxes 
on the RITA, your agency will gross-up your RITA by using a gross-up 
formula that multiplies the grossed-up CMTR by the total of all covered 
taxable relocation benefits, and then subtracts your grossed-up WTA 
from that total. That is:
[GRAPHIC] [TIFF OMITTED] TR21AU14.006

Where

C = CMTR
R = Reimbursements, allowances, and direct payments to vendors 
covered by WTA
Y = Total grossed-up WTA paid during the current year.


Sec.  302-17.55  What does my agency do once it has calculated my RITA 
under the one-year process?

    (a) Your RITA is likely to be different from the sum of the WTA 
computed and reported during the year, because the WTA is calculated 
using a flat rate, established by the IRC, while the RITA is calculated 
using the CMTR. Therefore:
    (1) If the calculation above results in a negative value (that is, 
if your agency's calculation shows that it withheld and reported too 
much money as WTA), then your agency will send an adjustment to the IRS 
using Form 941. In this case, your agency does not make a RITA payment 
to you because you do not need additional funds to pay your taxes. That 
is, everything you need to pay substantially all of your taxes was 
included in the adjusted WTA, and that is the amount that will appear 
on your Form W-2.
    (2) If the calculation above results in a positive value (that is 
if your agency's calculation shows that it did not withhold enough 
money for your income taxes), then your agency will pay your RITA to 
you before the end of the calendar year and report it to the IRS as 
part of your income for that year.
    (b) Shortly after the end of the calendar year, your agency will 
provide one or two W-2 Forms to you. At your agency's discretion, you 
may receive one W-2 that includes all of your taxable relocation 
expenses, WTA, and RITA (if any), along with your payroll wages, or you 
may receive one W-2 for your payroll wages and a separate one for your 
taxable relocation expenses, WTA, and RITA.


Sec.  302-17.56  What do I do, under the one-year process, once my 
agency has provided my W-2(s)?

    (a) You must use all W-2(s) that you have received to file your tax 
returns. On those returns, you must include all taxable relocation 
expenses shown on your W-2(s) as income, including your WTA and RITA 
(if any). Please note that you must also include all WTA as

[[Page 49654]]

withholding, in addition to the standard withholding from your payroll 
wages.
    (b) If you finished your relocation within one calendar year, and 
your agency paid all of your relocation reimbursements, allowances, and 
direct payments to vendors in the same calendar year, before the cutoff 
date, then your tax returns for that calendar year are the end of your 
relocation tax process. If, on the other hand, your agency reimburses 
you for relocation expenses, or pays allowances or relocation vendors 
on your behalf, during a second (and possibly a third) calendar year, 
then you and your agency repeat the process above for each of those 
years.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

Subpart G--The Two-Year RITA Process


Sec.  302-17.60  How are the terms ``Year 1'' and ``Year 2'' used in 
the two-year RITA process?

    (a) Year 1 is the calendar year in which the agency reimburses you 
for a specific expense, provides an allowance, or pays a vendor 
directly. If your reimbursements, allowances, and/or direct payments to 
vendors occur in more than one calendar year, you will have more than 
one Year 1.
    (b) Year 2 is the calendar year in which you submit your RITA claim 
and your agency pays your RITA to you.
    (c) In most cases:
    (1) For every Year 1 you will have a corresponding Year 2;
    (2) Every Year 2 immediately follows a Year 1; and
    (3) Year 2 is the year in which you file a tax return reflecting 
your remaining tax liability for taxable reimbursement(s), 
allowance(s), and/or direct payments to vendors in each Year 1.
    (d) The table below offers a graphic explanation of Year 1 and Year 
2, assuming that you begin your relocation in 2012 and incurred 
additional approved expenses in 2013.

------------------------------------------------------------------------
          January 2012                   2013                2014
------------------------------------------------------------------------
First Year 1....................  Second Year 1 and   Year 2 for 2013.
                                   Year 2 for 2012.
------------------------------------------------------------------------

Sec.  302-17.61  Is the WTA optional under the two-year process?

    (a) Yes. If your agency makes the WTA optional to you, you may 
choose to not receive the WTA.
    (b) WTA is paid at a rate of 25 percent. When deciding whether or 
not to receive the WTA, you should consider the following:
    (1) If you expect that your marginal Federal tax rate will be 25 
percent or higher for the calendar year for which you received the 
majority of your relocation reimbursements, you may want to elect to 
receive the WTA, because your initial reimbursements will be higher, as 
shown in the following Example 3 to part 302-17).

    Example 3 to Part 302-17: Claims Paid with and without WTA.

Allowance computed without WTA:
 
                              $1,300.00  Miscellaneous Expenses
                                          Allowance.
Minus......................      325.00  Federal Withholding Tax (25%).
Minus......................       18.85  Medicare Withholding Tax
                                          (1.45%).
Minus......................       80.60  FICA (Social Security) Tax
                                          (6.20%).
Equals.....................      875.55  Amount due to the transferee.
 
Allowance computed with WTA:
 
                               1,300.00  Miscellaneous Expenses
                                          Allowance.
Plus.......................      433.33  Withholding Tax Allowance (25%
                                          of $1733.33).
Equals.....................    1,733.33  Net allowance with WTA.
Minus......................      433.33  Federal Withholding Tax (25%).
Minus......................       25.13  Medicare Withholding Tax
                                          (1.45%).
Minus......................      107.47  FICA (Social Security) Tax
                                          (6.20%).
Equals.....................    1,167.40  Amount due to the transferee.
 

    (2) If you expect that your marginal Federal tax rate will be less 
than 25 percent, you may want to decline the WTA to avoid or limit 
possible overpayment of the WTA, the so-called ``negative RITA'' 
situation. In a ``negative RITA'' situation, you must repay some of the 
WTA in Year 2. However, even if your marginal Federal tax rate will be 
less than 25 percent, you may want to accept the WTA so that your 
initial reimbursement is larger. Example 3 shows the relative 
reimbursements you would receive by accepting and declining the WTA, in 
the case of a hypothetical $1,300 Miscellaneous Expense Allowance.


Sec.  302-17.62  What information do I put on my tax returns for Year 1 
under the two-year process?

    (a) Your agency provides allowances to you, reimburses you for 
vouchers that you submit, and pays certain relocation vendors directly, 
all during the same calendar year, as described in Subpart B of this 
Part. Some of these reimbursements, allowances, and direct payments to 
vendors are taxable income to you, the employee. Your agency computes a 
WTA and reports that withholding to the IRS for each of these that is 
taxable. This is Year 1 of the two-year process.
    (b) If your agency makes the WTA optional to you and you have 
chosen not to receive the WTA, then your agency computes withholding 
tax for each taxable reimbursement, allowance, and direct payment, and 
reports that withholding to the IRS. See Example 3 to Part 302-17 in 
this section.
    (c) Shortly after the end of the calendar year, your agency 
provides one or more W-2 forms to you. At its discretion, your agency 
may include all of your taxable relocation expenses and WTA (if any) in 
one W-2, along with your regular payroll wages, or it may provide you 
one W-2 for your regular payroll wages and a separate W-2 for your 
taxable relocation expenses and WTA (if any).
    (d) At approximately the same time as your agency provides your W-
2(s), it also may provide you an itemized list of all relocation 
benefits and the WTA (if any) for each benefit. You should use this 
statement to verify that your agency has included all covered taxable 
items in its calculations and to check your agency's calculations.
    (e) You must submit all W-2s that you have received with your Year 
1 tax returns. On those returns, you must include all taxable 
relocation expenses during the previous year as income. Furthermore, 
you must include the WTA (if any) as tax payments that your agency made 
for you during the previous year, in addition to the regular 
withholding of payroll taxes from your salary. [FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][REGTEXT[[P]*[/P]

[[Page 49655]]

Sec.  302-17.63  What information should I provide to my agency to make 
the RITA calculation possible under the two-year process?

    You should provide the information required in the ``Statement of 
Income and Tax Filing Status'' shown below. This information should be 
taken from the income tax returns you filed for Year 1.

       Statement of Income and Tax Filing Status--Two-Year Process
 
 
 
The following information, which my agency will use in calculating the
 RITA to which I am entitled, was shown on the Federal, state and local
 income tax returns that I (or my spouse and I) filed for the 20--------
 tax year.
 
Federal Filing status:
[ballot] Single........................  [ballot] Head of Household
[ballot] Married Filing Jointly........  [ballot] Qualifying Widow(er)
[ballot] Married Filing Separately.....
 
Taxable income as shown on my (our) IRS Form 1040: $----------------
 
State you are moving out of:
 ----------------
 
Filing status for the state moving out
 of: ------------
 
Marginal Tax Rate: --------%
 
State you are moving into:
 ----------------
 
Filing status for the state moving
 into: ----------------
 
Marginal Tax Rate: --------%
 
Locality you are moving out of: --------
 --------
 
Filing status for the locality moving
 out of: ----------------
 
Marginal Tax Rate: --------%
 
Locality you are moving into: ----------
 ------
 
Filing status for the locality moving
 into: ----------------
 
Marginal Tax Rate: --------%
 
The above information is true and
 accurate to the best of my (our)
 knowledge. I (we) agree to notify the
 appropriate agency official of any
 significant changes to the above so
 that appropriate adjustments to the
 RITA can be made.
------------------------------------     --------------------
Employee's signature                     Date
 
------------------------------------     --------------------
Spouse's signature (if filing jointly)   Date
 

Sec.  302-17.64  When should I file my ``Statement of Income and Tax 
Filing Status'' and RITA claim under the two-year process? 
[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED][REGTEXT[[P]*[/P]

    For the two-year process, you should file the ``Statement of Income 
and Tax Filing Status'' in Year 2, along with your RITA claim, after 
you file your income tax return. If your agency pays any taxable 
expenses covered by the WTA (if any) in more than one year, then you 
will have to file a new ``Statement of Income and Tax Filing Status'' 
each year. Your agency establishes the deadline each year for filing of 
your Statement.


Sec.  302-17.65  What happens if I do not file the ``Statement of 
Income and Tax Filing Status'' in a timely manner?

    The WTA is an advance on your income tax expenses, thus if you 
don't file the ``Statement of Income and Tax Filing Status'' in a 
timely manner, your agency will require you to repay the entire amount 
of the withholding and WTA (if any) that the agency has paid on your 
behalf.


Sec.  302-17.66  How do I claim my RITA under the two-year process?

    (a) To claim your RITA under the two-year process, you must submit 
a voucher and attach the ``Statement of Income and Tax Filing Status,'' 
as discussed in Sec. Sec.  302-17.63-302-17.65.
    (b) Your voucher must claim a specific amount. However, your agency 
will calculate your actual RITA after you submit your RITA voucher and 
your ``Statement of Income and Tax Filing Status;'' the amount you 
claim on your voucher does not enter into that calculation. You should 
perform the RITA calculation for yourself, as a check on your agency's 
calculation, but you are not required to put the ``right answer'' on 
the voucher you submit to claim your RITA.


Sec.  302-17.67  How does my agency calculate my RITA under the two-
year process?

    (a) Your agency calculates your RITA after receipt of your RITA 
voucher.
    (b) Your RITA is itself taxable income to you. To account for taxes 
on the RITA, your agency will gross-up your RITA by applying the CMTR 
to the final amount rather than the reimbursed amount.
    (c) Thus, your agency calculates your RITA by multiplying the 
Combined Marginal Tax Rate (CMTR) (using the state and local tax tables 
most current at the time of the RITA calculation) by the total of all 
covered taxable relocation benefits during the applicable Year 1, and 
then subtracting your WTA(s), if any, from the same Year 1 from that 
total. That is:
[GRAPHIC] [TIFF OMITTED] TR21AU14.007


[[Page 49656]]


Where

C = CMTR
R = Reimbursements, allowances, and direct payments to vendors 
covered by WTA during Year 1
Z = Total grossed-up WTAs paid during Year 1.


    Note to Sec.  302-17.67(c) - If your agency offers you the 
choice, the WTA is optional to you. If the employee has declined the 
WTA, enter zero for element Z in the above calculation.

Sec.  302-17.68  What does my agency do once it has calculated my RITA 
under the two-year process?

    (a) Your RITA is likely to be different from the sum of the WTA(s) 
paid during Year 1, if any, because the WTA is calculated using a flat 
rate, established by the IRC, while the RITA is calculated using the 
CMTR. Therefore:
    (1) If the RITA calculation in Sec.  302-17.67 results in a 
negative value (that is, if your agency's calculation shows that it 
withheld and reported too much money as income taxes), then your agency 
will report this result to you and will send you a bill for the 
difference, to repay the excess amount that it sent to the IRS on your 
behalf as withheld income taxes. The IRS will credit you for the full 
amount of withheld taxes, including the excess amount, when you file 
your income tax return for Year 1; therefore, you must repay the excess 
amount to your agency within 90 days, or within a time period set by 
your agency. If you are required to repay an amount in Year 2 that was 
included as wages on your W-2 in Year 1, you may be entitled to a 
miscellaneous itemized deduction on your Federal income tax return in 
Year 2. For more information, see IRS Publication 535, ``Business 
Expenses.'' If your agency chooses to offer you the choice, then you 
may want to decline the WTA to avoid this so-called ``negative RITA'' 
situation.
    (2) If the RITA calculation in Sec.  302-17.67 results in a 
positive value (that is, if your agency's calculation shows that it did 
not withhold enough money as income taxes), then your agency will pay 
your RITA to you before the end of Year 2 and will report it to the IRS 
as part of your income for that year. Also, after your agency has paid 
your RITA to you, it will provide a W-2 that shows your RITA as taxable 
income to you.
    (b) At your agency's discretion, you may receive one W-2 that 
includes all of your taxable relocation expenses, WTA (if any), and 
RITA (if any), along with your regular payroll wages, or you may 
receive one W-2 for your regular payroll wages and a separate one for 
your taxable relocation expenses, WTA, and RITA.[FEDREG][VOL]*[/
VOL][NO]*[/NO][DATE]*[/DATE][RULES][RULE][PREAMB][AGENCY]*[/
AGENCY][SUBJECT]*[/SUBJECT][/PREAMB][SUPLINF][HED]*[/
HED][REGTEXT][P]*[/P]


Sec.  302-17.69  How do I pay taxes on my RITA under the two-year 
process?

    When income taxes are due for Year 2, you must report your RITA, if 
any, as taxable income on your Federal, state, and local tax returns.
    (a) If your relocation process results in only one Year 2, or if 
the previous year was your last Year 1, your RITA is the only amount 
that you report as income resulting from your relocation for that Year 
2.
    (b) If, on the other hand, your relocation process results in more 
than one Year 2 (if, for example, you incurred relocation expenses 
during more than one calendar year), then, except for your last Year 2, 
you will need to report reimbursements, allowances, direct payments to 
vendors, and WTA(s), if any, for succeeding Year 1's at the same time 
that you report each Year 2's RITA.
    (c) See the table in Sec.  302-17.60 for a graphic explanation of 
Year 1 and Year 2.

Subpart H--Agency Responsibilities


Sec.  302-17.100  May we use a relocation services provider to comply 
with the requirements of this part?

    Yes. You may use the services of relocation companies to manage all 
aspects of relocation, including the RITA computation. Agencies that 
relocate few employees or do not have the resources to manage the 
complexity of relocation may find that the use of relocation companies 
is a practical alternative. As another alternative, agencies with 
infrequent requirements for relocation or with inadequate internal 
resources may establish an interagency agreement with one or more other 
agencies to pool resources to provide this service.


Sec.  302-17.101  What are our responsibilities with regard to taxes on 
relocation expenses?

    To ensure that all provisions of this Part are fulfilled, you must:
    (a) Prepare a relocation travel authorization that includes an 
estimate of the WTA and RITA, to obligate the funds that will be 
needed.
    (b) Determine, in light of the specific circumstances of each 
employee relocation, which reimbursements, allowances, and direct 
payments to vendors are taxable, and which are nontaxable.
    (c) Decide whether or not you will allow individual employees and/
or categories of employees to choose not to receive the WTA.
    (d) Calculate the WTA, and credit the amount of the WTA to the 
employee at the time of reimbursement.
    (e) Prepare the employee's W-2 Form(s) and ensure that it (they) 
reflect(s) the WTA.
    (f) Provide each employee an itemized list of relocation expenses 
after the end of each calendar year in which you provided an allowance, 
reimbursement, or direct payment to a vendor.
    (g) Establish processes for identifying the relevant Federal, 
state, and local marginal tax rates and for keeping that information 
current.
    (h) Establish processes for identifying states that treat a 
reimbursement or direct payment to a vendor as taxable even though it 
is nontaxable under the Federal IRC, and for keeping that information 
current.
    (i) Calculate the employee's CMTR(s).
    (j) Decide whether you will use the one-year or two-year RITA 
process and whether you will use different processes (that is, one-year 
or two-year) for different groups of employees within your agency.
    (k) Make sure the RITA calculation is done correctly and in a 
timely manner, whether your policies call for the calculation to be 
done by you or by a third party.
    (l) Make sure that payment of the RITA occurs in a timely manner 
(this is especially critical for the one-year process).
    (m) Develop criteria for accepting and rejecting requests for 
recalculation of RITA.
    (n) Establish a process for recalculating the RITA when the 
employee's request for recalculation is accepted.
    (o) Consult with IRS for clarification of any confusion stemming 
from taxes on relocation expenses.


Sec.  302-17.102  What happens if an employee fails to file and/or 
amend a ``Statement of Income and Tax Filing Status'' prior to the 
required date?

    (a) If a relocating employee does not file and/or amend a 
``Statement of Income and Tax Filing Status'' prior to the required 
date, and you are using a one-year RITA process, you are to switch to a 
two-year RITA process and send a written warning to the employee 
reminding them of the requirement and informing them that if they do 
not submit the ``Statement of Income and Tax Filing Status,'' you may 
declare the entire amount of the WTA forfeited.
    (b) If the relocating employee does not file and/or amend a 
Statement of Income and Tax Filing Status prior to the required date, 
and you are using a two-year RITA process, you are to send the employee 
a written warning informing them they have 60 days to file or amend 
their ``Statement of Income

[[Page 49657]]

and Tax Filing Status,'' or you will declare the WTA that you have 
already paid on his/her behalf forfeited and due as a debt to the 
Government.
    (c) If the relocating employee chose not to receive the WTA and 
fails to file a Statement of Income and Tax Filing Status prior to your 
required date, you are to send the employee a written warning that they 
have 60 days to file. If the employee still fails to file, you may 
close your case file and refuse any later claims for RITA related to 
this specific relocation.


Sec.  302-17.103  What are the advantages of choosing a 1-year or a 2-
year RITA process?

    (a) The one-year process is simpler. It reimburses the employee 
more quickly, and it eases the administrative burden required to 
calculate the RITA. Most importantly, the one-year process eliminates 
the possibility of charging employees for excess payments to the IRS, 
the so-called ``negative RITA.''
    (b) The two-year process provides a somewhat more accurate 
calculation of the additional taxes the employee incurs because it is 
based on the employee's actual Year One taxable income and filing 
status rather than the taxable income and filing status from the year 
before.

[FR Doc. 2014-18840 Filed 8-20-14; 8:45 am]
BILLING CODE 6820-14-P