[Federal Register Volume 60, Number 151 (Monday, August 7, 1995)]
[Rules and Regulations]
[Pages 40075-40077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19282]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 8607]
RIN 1545-AS98
Allowances Received by Members of the Armed Forces in Connection
With Moves to New Permanent Duty Stations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final 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
uniformed services in connection with a change of permanent duty
station. The final 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 final regulations are members of the uniformed
services (the Armed Forces, the commissioned corps of the National
Oceanic and Atmospheric Administration, and the commissioned corps of
the Public Health Service).
DATES: These regulations are effective August 7, 1995. For dates of
applicability, see ``Effective date'' portion under SUPPLEMENTARY
INFORMATION.
FOR FURTHER INFORMATION CONTACT: Marilyn E. Brookens, (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).
On December 21, 1994, temporary regulations (TD 8575) relating to
military expense allowances under sections 61 and 217 (relating to
definitions of gross income and of moving expenses) were published in
the Federal Register (59 FR 65711). A notice of proposed rulemaking
(IA-50-94) relating to the same subjects was published in the Federal
Register for the same day (59 FR 65739). No public hearing was
requested or held.
Written comments regarding the regulations were received. After
consideration of all the comments, the regulations proposed by IA-50-94
are adopted as revised by this Treasury decision, and the corresponding
temporary regulations are withdrawn. The comments are discussed below.
[[Page 40076]]
Explanation of Provisions
I. General Background
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 arose concerning the
federal tax treatment of certain allowances provided by the Department
of Defense and by the Department of Transportation under title 37 of
the United States Code to members of the Armed Forces in connection
with a transfer to a new permanent duty station. Those 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 (other than Hawaii or Alaska); (3) a temporary
lodging allowance, intended to help defray higher than normal living
costs (for up to 60 days) outside the United States or in Hawaii or
Alaska; and (4) a move-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 uniformed services 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, to the extent not excluded under other
provisions of the Code (such as section 217(g) or section 132(g)), are
to be treated as quarters or subsistence allowances. Section 1.61-2(b)
is revised to provide that these allowances are excluded from the gross
income of members of the uniformed services. Section 1.61-2(b)(2) and
section 1.217-2(g)(6) 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 excluded
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.
II. Public Comments
The National Oceanic and Atmospheric Administration (NOAA)
requested that the regulations provide active duty officers of the NOAA
Corps with an exclusion for the allowances covered by these
regulations. The commissioned corps of NOAA, the commissioned corps of
the Public Health Service (PHS), and the Armed Forces collectively
comprise the uniformed services. 10 U.S.C. 101(a)(5) (Supp. IV 1992).
The Armed Forces consist of the Army, Navy, Air Force, Marine Corps,
and Coast Guard. 10 U.S.C. 101(a)(4) (1988).
The pay and allowance provisions of title 37 apply to all members
of the uniformed services. In particular, the allowances that are the
subject of these regulations are the same for the NOAA commissioned
corps and the PHS commissioned corps as for the Armed Forces. The
Department of Treasury historically has extended the holdings of Jones
v. United States to all members of the uniformed services. I.T. 2232,
IV-2 C.B. 144 (1925); Mim. 3413, V-1 C.B. 29 (1926). Accordingly, the
final regulations under section 1.61-2(b) provide that the four
earlier-referenced allowances are quarters or subsistence allowances
and are excluded from gross income for members of the uniformed
services.
III. Effective Date
The final regulations are effective with respect to allowances for
expenses incurred after December 31, 1993.
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,
the notice of proposed rulemaking was submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regulations is Marilyn E. Brookens of
the 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 1.61-2 is amended by:
1. Removing the language ``Coast and Geodetic Survey'' from the
second sentence of paragraph (a)(1) and adding in its place the
language ``National Oceanic and Atmospheric Administration''.
2. Revising paragraph (b) to read as follows:
Sec. 1.61-2 Compensation for services, including fees, commissions,
and similar items.
* * * * *
(b) Members of the Armed Forces, National Oceanic and Atmospheric
Administration, and Public Health Service. (1) Subsistence and uniform
allowances granted commissioned officers, chief warrant officers,
warrant officers, and enlisted personnel of the Armed Forces, National
Oceanic and Atmospheric Administration, and Public Health Service of
the United States, and amounts received by them as commutation of
quarters, are excluded from gross income. Similarly, the value of
quarters or subsistence furnished to such persons is excluded from
gross income.
(2) For purposes of this section, quarters or subsistence includes
the following allowances for expenses
[[Page 40077]]
incurred after December 31, 1993, by members of the Armed Forces,
members of the commissioned corps of the National Oceanic and
Atmospheric Administration, and members of the commissioned corps of
the Public Health Service, 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 move-in
housing allowance, authorized by 37 U.S.C. 405. No deduction is allowed
under this chapter for any expenses reimbursed by such excluded
allowances. For the exclusion from gross income of--
(i) Disability pensions, see section 104(a)(4) and the regulations
thereunder;
(ii) Miscellaneous items, see section 122.
(3) The per diem or actual expense allowance, the monetary
allowance in lieu of transportation, and the mileage allowance received
by members of the Armed Forces, National Oceanic and Atmospheric
Administration, and the Public Health Service, while in a travel status
or on temporary duty away from their permanent stations, are included
in their gross income except to the extent excluded under the
accountable plan provisions of Sec. 1.62-2.
* * * * *
Sec. 1.61-22T [Removed]
Par. 3. Section 1.61-22T is removed.
Par. 4. Section 1.217-2 is amended by adding paragraph (g)(6) to
read as follows:
Sec. 1.217-2 Deduction for moving expenses paid or incurred in taxable
years beginning after December 31, 1969.
* * * * *
(g) * * *
(6) Disallowance of deduction. No deduction is allowed under this
section for any moving or storage expense reimbursed by an allowance
that is excluded from gross income.
Sec. 1.217-2T [Removed]
Par. 5. Section 1.217-2T is removed.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: July 27, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-19282 Filed 8-4-95; 8:45 am]
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