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:

Proposed rule.

SUMMARY:

The General Services Administration (GSA), in consultation with the Secretary of the Treasury, is proposing to amend 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.

DATES:

Interested parties should submit written comments to the Regulatory Secretariat at one of the addresses shown below on or before August 16, 2021 to be considered in the formation of the final rule.

ADDRESSES:

Submit comments in response to FTR Case 2020-302-1: Regulations.gov: http://www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching for “FTR Case 2020-302-1. Select the link “Comment Now” that corresponds with “FTR Case 2020-302-1.” Follow the instructions provided on the screen. Please include your name, company name (if any), and “FTR Case 2020-302-1” on your attached document. If your comment cannot be submitted using h ttps://www.regulations.gov,, call or email the points of contact in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

Instructions: Please submit comments only and cite FTR Case 2020-302-1, in all correspondence related to this case. Comments received generally will be posted without change to http://www.regulations.gov,, including any personal and/or business confidential information provided. To confirm receipt of your comment(s), please check www.regulations.gov,, approximately two to three days after submission to verify posting.

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

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.

To assist with the 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.

However, 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 subchapter 57 or chapter 41 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) contains an apparent typographical error as shown here in bold: “(b) 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 render this statutory provision meaningless because “this subchapter of chapter 41” does not exist. Accordingly, GSA developed a legislative proposal to correct the typographical error. However, until such time as a statutory amendment is made, GSA will implement 5 U.S.C. 5724b(b) as if it reads “. . . pursuant to this subchapter or chapter 41.” (emphasis added). GSA's decision is based on conversations with Congress, and is aimed at avoiding a literal interpretation of the statute which would produce an absurd result that is demonstrably at odds with Congressional intent.

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 300-304 (41 CFR Chapters 300-304).

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

This proposed rule will also adjust 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 will also be updated to remove home marketing incentives for new appointees who are not entitled to real estate expenses.

Additionally, this proposed rule will indicate, 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.) 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 anticipated to be a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This proposed rule is not anticipated to be a major rule under 5 U.S.C. 804.

III. Congressional Review Act

This proposed rule is not a major rule under 5 U.S.C. 804(2). 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 GSA will submit a report containing this proposed rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the Federal Register. OIRA has determined that this proposed rule is not a “major rule” as defined by 5 U.S.C. 804(2).

IV. Regulatory Flexibility Act

GSA does not expect this proposed 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 federal employees' relocations. The administrative changes provide further clarification with no 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 proposed rule on small entities.

GSA will also consider comments from small entities concerning the existing regulations in subparts affected by the proposed 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 proposes amending 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 revising the heading of the definition of “ Relocation service company (RSC)” and the first sentence 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. Revise the section heading and the first sentence of the introductory paragraph.

B. Revise Tables A and B. The revisions read as follows:

11. Amend Part 302-3 by revising the heading to Subpart B to read as follows:

Subpart B—Transferred Employees and Other Relocated Employees

12. Amend § 302-3.101 by:

a. Amending the section heading by adding the words “or other relocated employee” after the words “transferred employee”;

b. Amending the first sentence of the introductory text by adding the words “or other relocated employee” after the words “transferred employee”; and

c. Amending the second sentence of the introductory text by removing the word “transfer” and adding the word “relocation” in its place.

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

The revisions read as follows:

13. Amend § 302-3.300 by adding in the introductory paragraph 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 from the introductory paragraph the words “item 7 of Tables A and C in” and adding the words “Table G to” in its place.

15. Amend § 302-3.427 by:

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

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

c. Adding a new 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 from the first sentence the words “a transferred employee in relocating to the new official station” 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 in the first sentence the word “service” 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” 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.