[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