[Federal Register Volume 59, Number 244 (Wednesday, December 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31285]


[[Page Unknown]]

[Federal Register: December 21, 1994]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8575]
RIN 1545-AT01

 

Allowances Received by Members of the Armed Forces in Connection 
With Moves to New Permanent Duty Stations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations relating to the 
exclusion from gross income under section 61 of the Internal Revenue 
Code of 1986 (Code) of certain allowances received by members of the 
Armed Forces in connection with a change of permanent duty station. The 
temporary regulations are required because of amendments to the law 
made by section 13213(a)(1) of the Omnibus Budget Reconciliation Act of 
1993 (OBRA 1993), 107 Stat. 473 (1993), which redefined the term moving 
expenses under section 217(b) of the Code. Persons affected by the 
temporary regulations are members of the Armed Forces.

EFFECTIVE DATE: January 1, 1994.

FOR FURTHER INFORMATION CONTACT: Leonard H. Friedman, (202) 622-1585 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under sections 61 and 217 of the Internal Revenue Code 
(Code) that are required because of the amendment of section 217(b) by 
OBRA 1993. In Notice 94-59, 1994-1 C.B. 371, the IRS announced its 
intention to issue guidance to clarify that certain allowances received 
by members of the Armed Forces continue to be excludable from gross 
income notwithstanding the amendment of section 217(b).

Explanation of Provisions

    Section 217(g) of the Code provides that a member of the Armed 
Forces on active duty who moves pursuant to a military order and 
incident to a permanent change of station does not include in income 
reimbursements or allowances for moving or storage expenses, or the 
value of moving and storage services furnished in-kind. For purposes of 
section 217(g), moving expenses are defined in section 217(b). OBRA 
1993 amended section 217(b) by narrowing the definition of deductible 
moving expenses.
    As a result of this amendment, questions have arisen concerning the 
federal tax treatment of certain allowances provided by the Department 
of Defense to members of the Armed Forces (and by the Department of 
Transportation to members of the Coast Guard) in connection with a 
transfer to a new permanent duty station. These allowances include:
    (1) A dislocation allowance, intended to partially reimburse 
expenses (e.g., lease forfeitures, temporary living charges in hotels, 
and breakage of household goods in transit) incurred in relocating a 
household;
    (2) A temporary lodging expense, intended to partially offset the 
added living expenses of temporary lodging (up to 10 days) within the 
United States;
    (3) A temporary lodging allowance, intended to help defray higher 
than normal living costs (for up to 60 days) outside the United States; 
and
    (4) A moving-in housing allowance, intended to defray costs (e.g., 
rental agent fees, home-security improvements, and supplemental heating 
equipment) associated with occupying leased quarters outside the United 
States.
    Section 1.61-2(b) of the Income Tax Regulations provides, in part, 
that subsistence and uniform allowances granted to members of the Armed 
Forces, Coast and Geodetic Survey (now known as the National Oceanic 
and Atmospheric Administration), and Public Health Service, and amounts 
received by them as commutation of quarters, are to be excluded from 
gross income. Similarly, the value of quarters or subsistence furnished 
to such persons is excluded from gross income. These exclusions from 
gross income of quarters and subsistence allowances paid to members of 
the Armed Forces are ones of long-standing, dating back to 1925. See 
Jones v. United States, 60 Ct. Cl. 552 (1925).
    The Treasury Department and the IRS have determined that the four 
above-referenced allowances provided by the Department of Defense (and 
by the Department of Transportation), to the extent not excludable 
under other provisions of the Code (such as section 217(g) or section 
132(g)), are to be treated as subsistence or quarters allowances. 
Section 1.61-22T is added to provide that these allowances are 
excludable from gross income. The regulations also clarify that no 
deduction is allowed for any expenses incurred in connection with a 
transfer to a new permanent duty station to the extent the expenses are 
reimbursed by an excludable allowance.
    However, any expense that meets the definition of a moving expense 
as defined in section 217(b) and is not reimbursed continues to be 
deductible under current law.
    The temporary regulations are effective with respect to allowances 
for expenses incurred after December 31, 1993. Allowances for expenses 
incurred prior to January 1, 1994, in connection with a transfer to a 
new permanent duty station are excludable under section 217(g).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
these regulations will be submitted to the Chief Counsel for Advocacy 
of the Small Business Administration for comment on their impact on 
small business.

    Drafting Information--The principal author of these temporary 
regulations is Leonard H. Friedman, Office of Assistant Chief 
Counsel (Income Tax and Accounting). However, other personnel from 
the IRS and Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.61-22T is added to read as follows:


Sec. 1.61-22T  Compensation for services, including fees, commissions, 
and similar items received after December 31, 1993, by members of the 
Armed Forces, National Oceanic and Atmospheric Administration, and 
Public Health Service (temporary).

    For purposes of Sec. 1.61-2(b) (regarding certain allowances and 
other items provided to members of the Armed Forces, National Oceanic 
and Atmospheric Administration, and Public Health Service of the United 
States), quarters or subsistence includes the following allowances for 
expenses incurred by members of the Armed Forces after December 31, 
1993, to the extent that the allowances are not otherwise excluded from 
gross income under another provision of the Internal Revenue Code: a 
dislocation allowance, authorized by 37 U.S.C. 407; a temporary lodging 
allowance, authorized by 37 U.S.C. 405; a temporary lodging expense, 
authorized by 37 U.S.C. 404a; and a moving-in housing allowance, 
authorized by 37 U.S.C. 405. No deduction is allowed under this chapter 
for any expenses reimbursed by such excludable allowances.
    Par. 3. Section 1.217-2T is added to read as follows:


Sec. 1.217-2T  Deduction for moving expenses paid or incurred in 
taxable years beginning after December 31, 1969 (temporary).

    (a) through (g)(5) [Reserved].
    (6) No deduction is allowed under this section for any moving or 
storage expense reimbursed by an allowance that is excluded from gross 
income.

    Dated: December 9, 1994.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-31285 Filed 12-20-94; 8:45 am]
BILLING CODE 4830-01-P