[Federal Register Volume 64, Number 117 (Friday, June 18, 1999)]
[Rules and Regulations]
[Pages 32812-32816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15540]


=======================================================================
-----------------------------------------------------------------------

GENERAL SERVICES ADMINISTRATION

41 CFR Part 301-11

[FTR Interim Rule 7]
RIN 3090-AG99


Federal Travel Regulation; Income Tax Reimbursement Allowance 
(ITRA)

AGENCY: Office of Governmentwide Policy, GSA.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: The General Services Administration (GSA) is amending the 
Federal Travel Regulation (FTR) to add authority to implement sections 
of the Travel and Transportation Reform Act of 1998, which authorize 
Federal agencies to reimburse Federal, State and local income taxes 
incurred as a result of long term official travel. It also allows for 
the reimbursement of penalty and

[[Page 32813]]

interest payments due to incorrect withholdings by the employee's 
agency for tax years 1993 and 1994.

DATES: Effective Date: This interim rule is effective January 1, 1993 
and applies to all employees on a long term temporary duty assignment 
who incurred income taxes on money received for travel expenses.
    Comment Date: Comments must be received by August 17, 1999.

ADDRESSES: Written comments should be sent to Ms. Sharon Kiser, 
Regulatory Secretariat (MVR), Office of Governmentwide Policy, General 
Services Administration, 1800 F Street, NW, Washington, DC 20405. E-
mail comments may be sent to RIN.3090-AG[email protected].

FOR FURTHER INFORMATION CONTACT: Jim Harte, Travel Team Leader, Travel 
and Transportation Management Policy Division (MTT), telephone 202-501-
0483.

SUPPLEMENTARY INFORMATION:

A. Background

    In 1992, the Congress eliminated the travel expense deduction for 
travel assignments lasting more than one year, which caused travel 
expense reimbursements to become taxable income. On October 19, 1998, 
the President signed into law the Travel and Transportation Reform Act 
of 1998 (the Act) (Pub. L. 105-264). This interim rule implements the 
provisions of the Act authorizing the reimbursement of taxes incurred 
due to a temporary duty travel assignment.

B. Executive Order 12866

    GSA has determined that this interim rule is not a significant 
regulatory action for the purposes of Executive Order 12866 of 
September 30, 1993.

C. Regulatory Flexibility Act

    This interim rule is not required to be published in the Federal 
Register for notice and comment; therefore, the Regulatory Flexibility 
Act does not apply.

D. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the interim rule 
does not impose recordkeeping or information collection requirements, 
or the collection of information from offerors, contractors, or members 
of the public which require the approval of the Office of Management 
and Budget under 44 U.S.C. 501 et seq.

E. Small Business Regulatory Enforcement Fairness Act

    This interim rule is also exempt from congressional review 
prescribed under 5 U.S.C. 801 since it relates solely to agency 
management and personnel.

List of Subjects in 41 CFR part 301-11

    Government employees, Travel and transportation expenses.

    For the reasons set forth in the preamble, 41 CFR part 301-11 is 
amended to read as follows:

PART 301-11--PER DIEM EXPENSES

    1. The authority citation for part 301-11 is revised to read as 
follows:

    Authority: 5 U.S.C. 5707.

    2. Part 301-11 is amended by adding Subparts E and F to read as 
follows:

Subpart E--Income Tax Reimbursement Allowance (ITRA), Tax Years 1993 
and 1994

General

Sec.
301-11.501  What is the Income Tax Reimbursement Allowance (ITRA)?
301-11.502  Who is eligible to receive the ITRA?
301-11.503  Are Federal Insurance Contribution Act (FICA) and 
Medicare deductions included in any reimbursement under this part?

Employee Responsibilities

301-11.521  Must I file a claim to be reimbursed for the additional 
income taxes incurred?
301-11.522  If I was assessed an income tax penalty and/or interest 
payment due to incorrect income tax withholdings, are those payments 
reimbursable?
301-11.523  What documentation must I submit to substantiate my 
claim?
301-11.524  What steps must my agency take to determine my ITRA?
301-11.525  Is the ITRA I receive taxable income?
301-11.526  May I receive a lump sum payment of the additional tax 
liability on the covered ITRA in lieu of submitting another claim?
301-11.527  If I elect a lump sum payment, how is the ITRA paid?
301-11.528  If I do not elect lump sum payment is there any 
additional reimbursement?

Agency Responsibilities

301-11.531  What documentation must the employee submit to 
substantiate a claim?
301-11.532  How should we compute the employee's ITRA?
301-11.533  Are tax penalty and interest payments reimbursable?
301-11.534  What tax tables should we use to calculate the amount of 
allowable reimbursement?
301-11.535  How should we calculate the ITRA?
301-11.536  Is the ITRA reimbursement considered to be income to the 
employee?
301-11.537  Are income taxes to be withheld from the ITRA?
301-11.538  May we offer a lump sum payment to cover the income tax 
liability on the covered ITRA?
301-11.539  If the employee does not elect a lump sum payment, how 
is the tax on the ITRA calculated?
301-11.540  How do we handle any excess payment?

General


Sec. 301-11.501  What is the Income Tax Reimbursement Allowance (ITRA)?

    The ITRA is an allowance designed to reimburse Federal, State and 
local income taxes incurred incident to an extended TDY assignment at 
one location.


Sec. 301-11.502  Who is eligible to receive the ITRA?

    An employee (and spouse, if filing jointly) who was in a TDY status 
for an extended period at one location, and who incurred Federal, 
State, or local income taxes on amounts received as reimbursement for 
official travel expenses.


Sec. 301-11.503  Are Federal Insurance Contribution Act (FICA) and 
Medicare deductions included in any reimbursement under this part?

    No. Reimbursement is limited to income taxes.

Employee Responsibilities


Sec. 301-11.521  Must I file a claim to be reimbursed for the 
additional income taxes incurred?

    Yes. A claim must be submitted in accordance with your agency's 
policy.


Sec. 301-11.522  If I was assessed an income tax penalty and/or 
interest payment due to incorrect income tax withholdings, are those 
payments reimbursable?

    Yes, for the total amount of the income tax penalty and/or interest 
assessed by the IRS for tax years 1993 and 1994 only.


Sec. 301-11.523  What documentation must I submit to substantiate my 
claim?

    Your agency will determine what documentation is sufficient. (See 
Sec. 301-11.531.)


Sec. 301-11.524  What steps must my agency take to determine my ITRA?

    Your agency should:
    (a) Determine Federal, State and local marginal tax rates by using 
the procedures and the marginal tax tables established for the 
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8, and 
Appendices A, B, C and D to part 302-11 of this title; or
    (b) Determine reimbursement as calculated in the illustration shown 
in Sec. 301-11.535.

[[Page 32814]]

Sec. 301-11.525  Is the ITRA I receive taxable income?

    Yes. The amount received must be reported as taxable income in the 
year in which received, but you are eligible to receive an allowance to 
cover the taxes assessed on the ITRA under Sec. 301-11.528.


Sec. 301-11.526  May I receive a lump sum payment of the additional tax 
liability on the covered ITRA in lieu of submitting another claim?

    Yes, if agreed to in writing by your agency and with the 
understanding that you will be responsible for any income taxes due 
without further reimbursement.


Sec. 301-11.527  If I elect a lump sum payment, how is the ITRA paid?

    (a) Reimbursement is as illustrated:

                   Lump Sum ITRA Tax Paid to Employee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
ITRA reimbursement for tax year 1993..........................   $14,435
Federal Tax liability on ITRA Reimbursement (@ 28%)...........     4,042
VA State tax liability (@ 5.75%)..............................       830
Local tax liability...........................................         0
                                                               ---------
  Total reimbursement.........................................    19,307
------------------------------------------------------------------------

    (b) Reimbursement of the ITRA and the tax on the ITRA is a final 
lump sum payment with no further reimbursement. You will be responsible 
for any income taxes due on $19,307.


Sec. 301-11.528  If I do not elect lump sum payment is there any 
additional reimbursement?

    Yes. You are reimbursed for the tax on the tax reimbursement 
received. Your agency will calculate the tax on the tax reimbursement 
using the formulas developed for the Year 2 reimbursements of the 
relocation income tax allowance (see Sec. 302-11.8 of this title).

Agency Responsibilities


Sec. 301-11.531  What documentation must the employee submit to 
substantiate a claim?

    You must determine what documentation you require to be submitted 
with the employee's claim. It can include:
    (a) A certified statement as prescribed in Sec. 302-11.10 of this 
title or copies of completed Federal, State and local tax return for 
the tax year in which the taxes were withheld and paid.
    (b) Copies of W-2's and Form 1099's.
    (c) Any documentation received from the IRS identifying any 
interest or penalty payment (tax years 1993 and 1994 only).
    (d) Any other documentation necessary to substantiate the claim.


Sec. 301-11.532  How should we compute the employee's ITRA?

    You should follow the procedures prescribed for the relocation 
income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices 
A, B, C, and D to part 302-11 of this title or as illustrated in 
Sec. 301-11.535.


Sec. 301-11.533  Are tax penalty and interest payments reimbursable?

    Yes, the total amount of any penalty and interest assessed by the 
IRS (for tax years 1993 and 1994 only) due to the failure of the 
Government to withhold the appropriate income taxes are reimbursable.


Sec. 301-11.534  What tax tables should we use to calculate the amount 
of allowable reimbursement?

    The tax tables for the year the tax was incurred are to be used.


Sec. 301-11.535  How should we calculate the ITRA?

    (a) Use the documents prescribed in Sec. 301-11.531 to calculate 
the ITRA as follows:
    (1) Determine Federal, State and local marginal tax rates by using 
the procedures and the marginal tax tables established for the 
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and 
Appendices A, B, C and D to part 302-11 of this title; and
    (2) Add any penalty or interest for tax years 1993 or 1994 only to 
determine the full ITRA payment; or
    (b) As calculated in the following illustration.

    Example of calculating an employee's tax return using the 
marginal tax rate schedules in Appendix B to part 302-11 of this 
title:

        For Tax Years 1993 or 1994 (Married Filing Joint Return)
------------------------------------------------------------------------
                                             Original      Recalculated
------------------------------------------------------------------------
1. Adjusted Gross Income (w/ travel              $75,246         $75,246
 reimbursement).........................
2. Subtract travel reimbursement........  ..............        (15,482)
3. Subtract personal exemptions and             (12,689)        (12,689)
 itemized or standard deductions........
4. Adjusted taxable Income..............          62,557          47,075
5. Tax liability on adjusted taxable
 income:
    a. Federal..........................          17,516         $7,061*
                                                   (28%)           (15%)
    b. State, VA (5.75% tax bracket)....           3,597           2,707
    c. Local: Not applicable............               0               0
                                         -------------------------------
    d. Total............................          21,113           9,768
6. Difference of total of column 1 minus
 total of column 2:
    Additional Taxes Incurred due to
     travel reimbursement--$11,345
7. Add to the tax difference:
    a. Penalty Payment imposed by IRS
     tax year 1993--1,500
    b. Interest Payment imposed by IRS
     tax year 1993--1,500
Total 6 and 7a and b = ITRA--$14,345**
------------------------------------------------------------------------
* Adjusted taxable income places employee in lower tax bracket.
** The ITRA reimbursement is taxable income for the year in which paid
  at the appropriate Federal, State and local income tax rates.

Sec. 301-11.536  Is the ITRA reimbursement considered to be income to 
the employee?

    Yes. The ITRA reimbursement is considered taxable income in the 
year paid and is subject to tax withholding as any other income.


Sec. 301-11.537  Are income taxes to be withheld from the ITRA?

    Yes, as determined by your internal tax withholding procedures 
established for your agency pursuant to IRS procedures.


Sec. 301-11.538  May we offer a lump sum payment to cover the income 
tax liability on the covered ITRA?

    Yes, if the employee mutually agrees in writing to the lump sum 
payment and understands that he/she is responsible

[[Page 32815]]

for any income taxes without further reimbursement. (See the 
illustration in Sec. 301-11.527.)


Sec. 301-11.539  If the employee does not elect a lump sum payment, how 
is the tax on the ITRA calculated?

    The tax on the ITRA reimbursement should be calculated using the 
Year 2 formulas developed for the relocation income tax allowance. (See 
Sec. 302-11.8.)


Sec. 301-11.540  How do we handle any excess payment?

    You must collect any excess payments, which includes issuing 
corrected W-2's or 1099's.

Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years 1995 
and Thereafter

General

Sec.
301-11.601  What is the Income Tax Reimbursement Allowance (ITRA)?
301-11.602  Who is eligible to receive the ITRA?
301-11.603  Are Federal Insurance Contribution Act (FICA) and 
Medicare deductions included in any reimbursement under this part?

Employee Responsibilities

301-11.621  Must I file a claim to be reimbursed for the additional 
income taxes incurred?
301-11.622  If I was assessed an income tax penalty and/or interest 
payment due to incorrect income tax withholdings, are those payments 
reimbursable?
301-11.623  What documentation must I submit to substantiate my 
claim?
301-11.624  What steps must my agency take to determine my ITRA?
301-11.625  Is the ITRA I receive taxable income?
301-11.626  May I receive a lump sum payment of the additional tax 
liability on the covered ITRA in lieu of submitting another claim?
301-11.627  If I elect a lump sum payment, how is the ITRA paid?
301-11.628  If I do not elect lump sum payment is there any 
additional reimbursement?

Agency Responsibilities

 301-11.631  What documentation must the employee submit to 
substantiate a claim?
301-11.632  How should we compute the employee's ITRA?
301-11.633  Are tax penalty and interest payments reimbursable?
301-11.634  What tax tables should we use to calculate the amount of 
allowable reimbursement?
301-11.635  How should we calculate the ITRA?
301-11.636  Is the ITRA reimbursement considered to be income to the 
employee?
301-11.637  Are income taxes to be withheld from the ITRA?
301-11.638  May we offer a lump sum payment to cover the income tax 
liability on the covered ITRA?
301-11.639  If the employee does not elect a lump sum payment, how 
is the tax on the ITRA reimbursement calculated?
301-11.640  How do we handle any excess payment?

Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years 
1995 and Thereafter

General


Sec. 301-11.601  What is the Income Tax Reimbursement Allowance (ITRA)?

    The ITRA is an allowance designed to reimburse Federal, State and 
local income taxes incurred incident to an extended TDY assignment at 
one location.


Sec. 301-11.602  Who is eligible to receive the ITRA?

    An employee (and spouse, if filing jointly) who was in a TDY status 
for an extended period at one location and who incurred Federal, State, 
or local income taxes on amounts received as reimbursement for official 
travel expenses.


Sec. 301-11.603  Are Federal Insurance Contribution Act (FICA) and 
Medicare deductions included in any reimbursement under this part?

    No. Reimbursement is limited to income taxes.

Employee Responsibilities


Sec. 301-11.621  Must I file a claim to be reimbursed for the 
additional income taxes incurred?

    Yes, a claim must be submitted in accordance with your agency's 
policy.


Sec. 301-11.622  If I was assessed an income tax penalty and/or 
interest payment due to incorrect income tax withholdings, are those 
payments reimbursable?

    No. The reimbursement of tax penalty and/or interest payment 
assessed by the IRS is limited by law to tax years 1993 and 1994 only.


Sec. 301-11.623  What documentation must I submit to substantiate my 
claim?

    Your agency will determine what documentation is sufficient. (See 
Sec. 301-11.631.)


Sec. 301-11.624  What steps must my agency take to determine my ITRA?

    Your agency should:
    (a) Determine Federal, State and local marginal tax rates by using 
the procedures and the marginal tax tables established for the 
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and 
Appendices A, B, C and D to part 302-11 of this title; or
    (b) Determine reimbursement as calculated in the illustration shown 
in Sec. 301-11.535.


Sec. 301-11.625  Is the ITRA I receive taxable income?

    Yes. The amount received must be reported as taxable income in the 
year in which received, but you are eligible to receive an allowance to 
cover the taxes assessed on the ITRA under Sec. 301-11.628.


Sec. 301-11.626  May I receive a lump sum payment of the additional tax 
liability on the covered ITRA in lieu of submitting another claim?

    Yes, if agreed to in writing by your agency and with the 
understanding that you will be responsible for any income taxes due 
without further reimbursement.


Sec. 301-11.627  If I elect a lump sum payment, how is the ITRA paid?

    (a) Reimbursement is as illustrated:

                   Lump Sum ITRA Tax Paid to Employee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
ITRA reimbursement for tax year 1995..........................   $14,435
Federal Tax liability on ITRA Reimbursement (@ 28%)...........     4,042
VA State tax liability (@ 5.75%)..............................       830
Local tax liability...........................................         0
                                                               ---------
  Total reimbursement.........................................    19,307
------------------------------------------------------------------------

    (b) Reimbursement of the ITRA and tax on the ITRA is a final lump 
sum payment with no further reimbursement. You will be responsible for 
any income taxes due on $19,307.


Sec. 301-11.628  If I do not elect lump sum payment is there any 
additional reimbursement?

    Yes. You are reimbursed for the tax on the tax reimbursement 
received. Your agency will calculate the tax on the tax reimbursement 
using the formulas developed for the Year 2 reimbursements of the 
relocation income tax allowance (see Sec. 302-11.8 of this title).

Agency Responsibilities


Sec. 301-11.631  What documentation must the employee submit to 
substantiate a claim?

    You must determine what documentation you require to be submitted 
with the employee's claim. It may include:
    (a) A certified statement as prescribed in Sec. 302-11.10 of this 
title or a copy of the employee's completed Federal, State and local 
tax return for the tax year in which the taxes were withheld and paid.

[[Page 32816]]

    (b) Copies of W-2's and Form 1099's; and
    (c) Any other documentation necessary to substantiate your claim.


Sec. 301-11.632  How should we compute the employee's ITRA?

    You should follow the procedures prescribed for the relocation 
income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices 
A, B, C, and D to part 302-11 of this title or as illustrated in 
Sec. 301-11.535.


Sec. 301-11.633  Are tax penalty and interest payments reimbursable?

    No. The reimbursement of penalty and/or interest payments assessed 
by the IRS is limited by law to tax years 1993 and 1994 only.


Sec. 301-11.634  What tax tables should we use to calculate the amount 
of allowable reimbursement?

    The tax tables for the year the tax was incurred are to be used.


Sec. 301-11.635  How should we calculate the ITRA?

    Use the documents prescribed in Sec. 301-11.631 to calculate the 
ITRA as follows:
    (a) Determine Federal, State and local marginal tax rates by using 
the procedures and the marginal tax tables established for the 
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and 
Appendices A, B, C and D to part 302-11 of this title, or
    (b) As calculated in the following illustration.

    Example of calculating an employee's tax return using the 
marginal tax rate schedules in Appendix B to part 302-11 of this 
title:

                    For Tax Year 1995 and Thereafter
                      [Married Filing Joint Return]
------------------------------------------------------------------------
                                             Original      Recalculated
------------------------------------------------------------------------
1. Adjusted Gross Income (w/ travel              $75,246         $75,246
 reimbursement):........................
2. Subtract travel reimbursement:.......  ..............        (15,482)
3. Subtract personal exemptions and             (12,689)        (12,689)
 itemized or standard deductions........
4. Adjusted taxable income..............          62,557          47,075
5. Tax liability on adjusted taxable
 income:
    a. Federal (28%)....................          17,516          *7,061
                                                                   (15%)
    b. State, VA (5.75% tax bracket)....           3,597           2,707
    c. Local: Not applicable............               0               0
                                         -------------------------------
    d. Total............................          21,113           9,768
6. Difference of total of column 1 minus
 total of column 2: Additional Taxes
 Incurred due to travel reimbursement--
 $11,345
Total = ITRA--$11,345**
------------------------------------------------------------------------
*Adjusted taxable income places employee in lower tax bracket.
**The ITRA reimbursement is taxable income for the year in which paid at
  the appropriate Federal, State and local income tax rates.

Sec. 301-11.636  Is the ITRA reimbursement considered to be income to 
the employee?

    Yes. The ITRA reimbursement is considered taxable income in the 
year paid and is subject to tax withholding as any other income.


Sec. 301-11.637  Are income taxes to be withheld from the ITRA?

    Yes, as determined by your internal tax withholding procedures 
established for your agency pursuant to IRS procedures.


Sec. 301-11.638  May we offer a lump sum payment to cover the income 
tax liability on the covered ITRA?

    Yes, if the employee mutually agrees in writing to the lump sum 
payment and understands that he/she is responsible for any income taxes 
without further reimbursement. See the illustration in Sec. 301-11.627.


Sec. 301-11.639  If the employee does not elect a lump sum payment, how 
is the tax on the ITRA reimbursement calculated?

    The tax on the tax reimbursement should be calculated using the 
Year 2 formulas developed for the relocation income tax allowance. (See 
Sec. 302-11.8.)


Sec. 301-11.640  How do we handle any excess payment?

    You must collect any excess payments, which includes issuing 
corrected W-2's or 1099's.

    Dated: June 10, 1999.
David J. Barram,
Administrator of General Services.
[FR Doc. 99-15540 Filed 6-17-99; 8:45 am]
BILLING CODE 6820-34-P