Federal Travel Regulation; Taxes on Relocation Expenses, Withholding Tax Allowance (WTA) and Relocation Income Tax Allowance (RITA) Eligibility

AGENCY:

Office of Government-wide Policy (OGP), General Services Administration (GSA).

ACTION:

Final rule.

SUMMARY:

The General Services Administration (GSA), in consultation with the Secretary of the Treasury, is amending the Federal Travel Regulation (FTR) to authorize Withholding Tax Allowance (WTA) and Relocation Income Tax Allowance (RITA) to all individuals who receive relocation allowances paid by the Federal Government. This amendment is in accordance with legislative changes to GSA's statutory authority for taxes on reimbursements for travel, transportation, and relocation expenses as enacted in the National Defense Authorization Act for Fiscal Year 2020, and as further amended by the National Defense Authorization Act for Fiscal Year 2021.

DATES:

Effective date: This final rule is effective on December 28, 2021. Applicability date: This final rule is applicable to individuals who are authorized reimbursement for relocation expenses under the FTR and who receive some or all reimbursements, direct payments, or indirect payments on or after January 1, 2018.

FOR FURTHER INFORMATION CONTACT:

Mr. Rodney (Rick) Miller, Program Analyst, Office of Government-wide Policy, at 202-501-3822 or rodney.miller@gsa.gov for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755 or GSARegSec@gsa.gov. Please cite “FTR Case 2020-302-1.”

SUPPLEMENTARY INFORMATION:

I. Background

GSA published a proposed rule in the Federal Register on June 15, 2021 (86 FR 31659). The rule proposed to amend the FTR sections pertaining to eligibility for WTA and RITA in accordance with statutory changes to 5 U.S.C. 5724b, update relevant FTR part 302-3 tables to include RITA as a mandatory allowance that agencies must pay or reimburse, and adjust the relocation tables for certain mandatory and discretionary relocation entitlements depending on the individual's type of movement.

The public had 60 calendar days to comment on the proposed rule. GSA received no comments opposing the amendment and one comment supporting its adoption. GSA did not make any changes to this final rule based on the supporting comment.

Federal agencies authorize relocation entitlements to those listed at FTR § 302-1.1 and those assigned under the Government Employees Training Act (GETA) (5 U.S.C. Chapter 41).

Public Law (Pub. L.) 115-97, known as the “Tax Cuts and Jobs Act of 2017,” suspended qualified moving expense deductions along with the exclusion for employer reimbursements and payments of moving expenses effective January 1, 2018, for tax years 2018 through 2025, therefore making almost all relocation entitlements subject to additional tax liability.

Agencies are authorized to pay WTA and RITA to cover “substantially all” of the increased tax liability resulting from receipt of the relocation expense reimbursements either paid directly or indirectly. However, in the version of 5 U.S.C. 5724b immediately preceding the passage of Section 1114 of the “National Defense Authorization Act for Fiscal Year 2020” (Pub. L. 116-92) (“the Act”), WTA and RITA were available only to employees “transferred” in the interest of the Government from one official station or agency to another for permanent duty.

Previously, new appointees (including political appointees), Senior Executive Service (SES) employees performing a “last move home”, employees returning from an overseas assignment for the purpose of separating from Government service, and those assigned under GETA were not eligible for WTA and RITA as such individuals were not “transferred” in the interest of the Government from one official station or agency to another for permanent duty. The suspension of qualified moving expense deductions in Public Law 115-97 substantially increased the tax liability of these individuals, which could not be reimbursed through WTA or RITA.

Section 1114 of the Act amended 5 U.S.C. 5724b to expand eligibility for WTA and RITA beyond “transferred” employees to include all individuals whose travel, transportation, or relocation expenses are reimbursed or furnished in kind pursuant to chapter 57, subchapter II or chapter 41, both of title 5, U.S.C. These individuals include, among others, those not previously eligible for WTA and RITA, e.g., new appointees (including political appointees), employees returning from an overseas assignment for the purpose of separation from Government service, SES employees eligible for “last move home” entitlements, and those assigned under GETA. The Act also includes a retroactive effective date to January 1, 2018, to allow those individuals who received taxable travel, transportation, or relocation allowances since January 1, 2018, to now submit a RITA claim for the additional tax liability.

Of note, 5 U.S.C. 5724b(b) contained an apparent typographical error as shown here in bold: “For purposes of this section, the term `travel, transportation, or relocation expenses' means all travel, transportation, or relocation expenses reimbursed or furnished in kind pursuant to this subchapter of chapter 41.” (emphasis added). A literal implementation of the text would have rendered this statutory provision meaningless because “this subchapter of chapter 41” does not exist. Accordingly, GSA developed a legislative proposal to correct the typographical error. Until the statutory amendment was made, GSA implemented 5 U.S.C. 5724b(b) as if it read “. . . pursuant to this subchapter or chapter 41.” (emphasis added). GSA's decision was based on conversations with Congress, and aimed at avoiding a literal interpretation of the statute which would have produced an absurd result that is demonstrably at odds with Congressional intent. GSA's legislative proposal resulted in section 1121 of the “William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021” (Pub. L. 116-283) which amended 5 U.S.C. 5724b(b) to correct the typographical error. The amendments made to 5724b(b) by section 1121 are retroactively effective as if included in the enactment of section 1114 of the Act.

Pursuant to 5 U.S.C. 5738, the Administrator of General Services is mandated to prescribe necessary regulations regarding Federal employees who relocate in the interest of the Government. The overall implementing authority is the FTR, codified in title 41 of the Code of Federal Regulations, chapters 300 through 304 (41 CFR chapters 300 through 304).

This final rule amends FTR sections pertaining to eligibility for WTA and RITA in accordance with statutory changes to 5 U.S.C. 5724b. Specifically, this amendment updates relevant tables in FTR Part 302-3 to include RITA as a mandatory allowance that agencies must pay or reimburse.

This final rule also adjusts the relocation tables at §§ 302-3.2 and 302-3.101 to update certain mandatory and discretionary relocation entitlements depending on the individual's type of movement. Updates to the tables include, but are not limited to, adding use of a relocation services company, home marketing incentives, and temporary quarters subsistence expense (TQSE) as discretionary allowances to, from, or between non-foreign areas. The tables are also updated to remove home marketing incentives for new appointees who are not entitled to real estate expenses.

Additionally, this final rule indicates, as relevant, where allowances are intended to apply more broadly to other relocating individuals ( e.g., appointments, reassignments, separations, and last move(s) home), in addition to transferred employees.

II. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 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 is not a significant regulatory action and, therefore, is not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.

III. Congressional Review Act

Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. The Office of Information and Regulatory Affairs (OIRA) has determined that this rule is not a major rule under 5 U.S.C. 804(2), therefore, GSA did not submit a rule report.

IV. Regulatory Flexibility Act

GSA does not expect this final rule to have a 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., because it applies only to Federal agencies and employees and it affects less than one percent of all relocations authorized under FTR part 302. The administrative changes to the FTR provide further clarification on existing statutory changes with no additional impact to agencies.

Therefore, an Initial Regulatory Flexibility Analysis has not been performed. GSA invites comments from small business concerns and other interested parties on the expected impact of this final rule on small entities.

GSA will also consider comments from small entities concerning the existing regulations in subparts affected by the final rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FTR Case 2020-302-1), in correspondence.

V. 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 (OMB) under 44 U.S.C. 3501, et seq.

List of Subjects in 41 CFR Parts 300-3, 302-2, 302-3, 302-12, 302-15, and 302-17

• Government employees
• Income taxes
• Travel and transportation expenses

Therefore, GSA amends 41 CFR parts 300-3, 302-2, 302-3, 302-12, 302-15, and 302-17 as set forth below:

PART 300-3—GLOSSARY OF TERMS

1. The authority citation for 41 CFR part 300-3 continues to read as follows:

Authority: 5 U.S.C. 5707; 40 U.S.C. 121(c); 49 U.S.C. 40118; 5 U.S.C. 5738; 5 U.S.C. 5741-5742; 20 U.S.C. 905(a); 31 U.S.C. 1353; E.O 11609, as amended, 3 CFR, 1971-1975 Comp., p. 586, Office of Management and Budget Circular No. A-126, revised May 22, 1992.

2. Amend § 300-3.1 by removing the definition of “Relocation service company (RSC)” and adding in its place the definition of “Relocation services company (RSC)” to read as follows:

PART 302-2—EMPLOYEES ELIGIBILITY REQUIREMENTS

3. The authority citation for 41 CFR part 302-2 continues to read as follows:

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

4. Revise § 302-2.1 to read as follows:

5. Revise § 302-2.13 to read as follows:

6. Revise § 302-2.14 to read as follows.

7. Revise § 302-2.17 to read as follows:

8. Revise § 302-2.101 to read as follows:

PART 302-3—RELOCATION ALLOWANCE BY SPECIFIC TYPE

9. The authority citation for 41 CFR part 302-3 continues to read as follows:

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

10. Amend § 302-3.2 by:

a. Revising the section heading and the first sentence of the introductory text; and

b. Revising Tables A and B.

The revisions read as follows:

11. Revise the heading for subpart B to read as follows:

Subpart B—Transferred Employees and Other Relocated Employees

12. Amend § 302-3.101 by:

a. Revising the section heading;

b. In the introductory text:

i. Adding to the first sentence the words “or other relocated employee” after the words “transferred employee”; and

ii. Removing the word “transfer” from the second sentence and adding the word “relocation” in its place; and

c. Revising Tables A, B, C, D, F, G, and I.

The revisions read as follows:

13. Amend § 302-3.300 by adding the words “(see Table F in § 302-3.101 for a summary of allowances)” after the word “goods”.

14. Amend § 302-3.306 by removing the words “item 7 of Tables A and C in § 302.3.101” and adding the words “Table G to § 302-3.101” in its place.

15. Amend § 302-3.427 by:

a. Removing the word “and” at the end of the paragraph (f);

b. Removing the period from the end of the paragraph (g) and adding “; and” in its place; and

c. Adding paragraph (h).

The addition reads as follows:

16. Revise § 302-3.503 to read as follows:

17. Amend § 302-3.505 by revising paragraphs (a) through (d) and adding paragraph (e) to read as follows:

PART 302-12—USE OF A RELOCATION SERVICES COMPANY

18. The authority citation for 41 CFR part 302-12 continues to read as follows:

Authority: 5 U.S.C. 5738 and 20 U.S.C. 905(c).

19. Amend § 302-12.100 by removing the words “a transferred employee in relocating to the new official station” from the first sentence and adding the words “an employee who relocates” in its place.

PART 302-15—ALLOWANCE FOR PROPERTY MANAGEMENT SERVICES

20. The authority citation for 41 CFR 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.

21. Amend § 302-15.13 by removing the word “service” in the first sentence and adding the word “services” in its place.

PART 302-17—TAXES ON RELOCATION EXPENSES

22. The authority citation for 41 CFR part 302-17 continues to read as follows:

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

23. Amend § 302-17.1 by revising the definition for “Relocation income tax allowance (RITA)” to read as follows:

24. Amend § 302-17.3 by removing the words “transferred employees” and adding the words “employees or individuals eligible for relocation expense allowances under § 302-1.1 of this chapter” in its place.

25. Amend § 302-17.5 by revising the second sentence and adding a third sentence to read as follows:

26. Remove § 302-17.6.

27. Redesignate §§ 302-17.7 through 302-17.13 as §§ 302-17.6 through 302-17.12.