[Federal Register Volume 84, Number 227 (Monday, November 25, 2019)]
[Rules and Regulations]
[Pages 64779-64783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25411]
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GENERAL SERVICES ADMINISTRATION
41 CFR Parts 302-1, 302-2, 302-4, and 302-17
[FTR Amendment 2020-02; FTR Case 2019-302; Docket No. 2019-0011,
Sequence 1]
RIN 3090-AK00
Federal Travel Regulation; Taxes on Relocation Expenses,
Relocation Expense Reimbursement
AGENCY: Office of Government-wide Policy (OGP), General Services
Administration (GSA).
ACTION: Direct final rule; request for comments.
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SUMMARY: The General Services Administration (GSA), in consultation
with the Secretary of the Treasury, is issuing a direct final rule to
amend the Federal Travel Regulation (FTR) to authorize relocation
reimbursement for a number of expenditures. This amendment is necessary
because the Tax Cuts and Jobs Act of 2017 suspended both the moving
expenses income tax deduction and the exclusion from income for
qualified moving expense reimbursements for tax years 2018 through
2025.
DATES: Effective date: This rule is effective on January 9, 2020
without further action, unless GSA receives adverse comments by
December 26, 2019. GSA will consider whether these comments are
significant enough to publish a timely withdrawal in the Federal
Register informing the public that this direct final rule will not take
effect. Please see SUPPLEMENTARY INFORMATION for more information on
significant adverse comments.
Applicability date: This direct final rule is applicable to
employees who are authorized reimbursement for relocation expenses
under the FTR and who receive some or all reimbursements, direct
payments, or indirect payments on or after January 1, 2018, and on or
before December 31, 2025.
Comment Date: Interested parties should submit written comments to
the Regulatory Secretariat Division at one of the addresses shown below
on or before December 26, 2019 to be considered in the formation of the
final rule.
[[Page 64780]]
ADDRESSES: Submit comments identified by FTR Case 2019-302 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by entering ``FTR Case
2019-302'' under the heading ``Enter Keyword or ID'' and selecting
``Search.'' Select the link ``Submit a Comment'' that corresponds with
``FTR Case 2019-302'' and follow the instructions provided on the
screen. Please include your name, company name (if any), and ``FTR Case
2019-302'' on your attached document.
Mail: General Services Administration, Regulatory
Secretariat Division (MVCB), Attn: Lois Mandell, 1800 F Street NW,
Washington, DC 20405.
Instructions: Please submit comments only and cite ``FTR Case 2019-
302'' in all correspondence related to this case. All comments received
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
(except allow 30 days for posting of comments submitted by mail).
FOR FURTHER INFORMATION CONTACT: For clarification of content, contact
Mr. Rick Miller, Program Analyst, Office of Government-wide Policy, at
202-501-3822 or [email protected]. Contact the Regulatory
Secretariat Division (MVCB), 1800 F Street NW, Washington, DC 20405,
202-501-4755, for information pertaining to status or publication
schedules; please cite ``FTR Case 2019-302.''
SUPPLEMENTARY INFORMATION:
A. Public Participation
GSA is publishing this direct final rule without a prior proposed
rule because this is a non-controversial action resulting from changes
to the Internal Revenue Code made by Public Law (Pub. L.) 115-97, known
as the ``Tax Cuts and Jobs Act of 2017'' (December 22, 2017), and GSA
anticipates no significant adverse comments. A significant adverse
comment is defined as one where the comment explains why the rule would
be inappropriate, including challenges to the rule's underlying premise
or approach, or would be ineffective or unacceptable without a change.
In determining whether a significant adverse comment is sufficient to
terminate a direct final rulemaking, GSA will consider whether the
comment raises an issue serious enough to warrant a substantive
response in a notice-and-comment process. GSA notes that comments that
are frivolous, insubstantial, or outside the scope of the rule will not
be considered adverse under this procedure. A comment recommending a
rule change in addition to the rule will not be considered a
significant adverse comment, unless the comment states why the rule
would be ineffective without the additional change. In addition, if a
significant adverse comment applies to a part of a rule and that part
can be severed from remainder of the rule (e.g., where a rule deletes
several unrelated regulations), GSA may adopt as final those parts of
the rule that are not the subject of a significant adverse comment.
For detailed instructions on sending comments and additional
information on the rulemaking process, see the ADDRESSES section of
this document.
B. Background
The Tax Cuts and Jobs Act of 2017 suspended moving expense
deductions along with the exclusion for employer reimbursements and
payments of qualified moving expenses effective January 1, 2018, for
tax years 2018 through 2025. 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).
C. Discussion of Changes and Expected Impact of This Rule
The direct final rule amends the FTR in accordance with the new tax
changes impacting relocation expense entitlements for those employees
identified in FTR section 302-1.1 who are authorized relocation
reimbursements under the FTR and who receive some or all
reimbursements, direct payments, or indirect payments on or after
January 1, 2018 and on or before December 31, 2025. This direct final
rule amends the FTR sections pertaining to the supplemental wage rate,
taxable and nontaxable relocation entitlements, Withholding Tax
Allowance (WTA), Relocation Income Tax Allowance (RITA), and employee
eligibility for WTA and RITA. This direct final rule also clarifies the
50-mile distance test definition for purposes of relocation expense
allowances, where to find relocation mileage reimbursement rates when
using a privately owned vehicle (POV) to travel from the old duty
station to the new duty station, and other provisions of FTR Chapter
302 impacted by the new tax changes. In addition, this direct final
rule removes certain examples and tables from FTR part 302-17 and
directs readers to updated examples and tables published in an FTR
bulletin on the GSA website.
Accordingly, the direct final rule amends the FTR by:
1. Section 302-1.1(b)--Revising language regarding application of
the 50-mile distance test.
2. Section 302-2.6(b)--Removing the second sentence and its
unnecessary reference to the Internal Revenue Code (IRC) and adding a
sentence with factors for agencies to consider when authorizing an
exception to the 50-mile distance test.
3. Part 302-4--Revising the authority citation to correct a
typographical error.
4. Section 302-4.300--Revising the last sentence to replace a
defunct website link.
5. Section 302-17.1--Revising the term ``Marginal tax rate (MTR)''
to remove the example and notify the reader that examples of how to
determine the MTR are published in an FTR bulletin.
6. Section 302-17.5--Revising the second sentence to clarify that
eligibility for WTA and RITA includes employees transferring in the
interest of the Government from one official station or agency to
another for permanent or temporary change of station (TCS).
7. Section 302-17.6--Revising paragraphs (b) and (c) and adding
paragraph (d) to include Senior Executive Service (SES) employees
making last moves home for the purpose of separating from Government
service as not eligible for the WTA and RITA.
8. Section 302-17.8--Revising paragraph (a) to effectuate the new
tax changes that render certain expenses non-deductible, and revising
paragraph (b) to note that the table accompanying this section
summarizing the FTR allowances, limitations, and tax treatment of each
reimbursement, allowance, or direct payment to a service provider or
vendor has been removed from the FTR and placed in an FTR Bulletin.
Removing paragraph (c) because its reference to the table to Sec. 302-
17.8 is now obsolete.
9. Table to Sec. 302-17.8. FTR Allowances and Federal Income Tax
Treatments--Removing the Table because it is published in an FTR
bulletin.
10. Section 302-17.12--Removing reference to ``IRS Publication 521,
Moving Expenses'' as it does not
[[Page 64781]]
provide additional information and guidance on WTA and RITA.
11. Section 302-17.21--Revising and adding paragraphs on which
relocation expenses the WTA covers based upon the new tax changes and
updating a reference regarding situations where the employee or an
immediate family member does not hold full title to the home being
bought or sold.
12. Section 302-17.22--Revising paragraph (a) to reflect which
relocation expenses the WTA does not cover based upon the new tax
changes. Removing paragraph (e) and redesignating paragraphs (f), (g),
and (h) as paragraphs (e), (f), and (g), respectively.
13. Section 302-17.24--Revising to update the supplemental wage
rate from ``25 percent'' to the applicable supplemental wage rate
generally. Removing Example 1 to part 302-17 and adding a sentence
notifying the reader that examples of how to calculate the WTA are
published in an FTR bulletin.
14. Note to Section 302-17.24--Revising to include Medicare in the
parenthetical because both Social Security and Medicare payroll taxes
are collected together under the Federal Insurance Contributions Act
(FICA) tax.
15. Section 302-17.30(a)--Revising to update the percentage rate
from ``25 percent'' to the income tax withholding rate applicable to
supplemental wages generally.
16. Section 302-17.40--Adding a sentence to paragraph (b) notifying
the reader that examples of how to calculate the combined marginal tax
rate are published in an FTR bulletin and removing Example 2 to part
302-17 from paragraph (c).
17. Section 302-17.60(d)--Removing paragraph (d) and its
accompanying table as unnecessary.
18. Section 302-17.61(b)--Revising paragraphs (b)(1) and (b)(2) to
update the supplemental wage rate from ``25 percent'' to the applicable
supplemental wage rate generally, and removing from paragraph (b)(1)
Example 3 to part 302-17 and references thereto in paragraphs (b)(1)
and (b)(2). Adding paragraph (b)(3) to notify the reader that examples
of relocation expense allowances paid by accepting or declining the WTA
are published in an FTR bulletin.
19. Section 302-17.62(b)--Removing the last sentence as it refers
to Example 3 to part 302-17 which is now published in an FTR Bulletin.
D. 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.
GSA has determined that this direct final rule is a significant
regulatory action and is subject to review under section 6(b) of E.O.
12866, Regulatory Planning and Review, dated September 30, 1993. GSA
has further determined that this direct final rule is not a major rule
under 5 U.S.C. 804.
E. Executive Order 13771
This direct final rule is not subject to the requirements of E.O.
13771 because it is related to agency organization, management, or
personnel.
F. Regulatory Flexibility Act
This direct final rule will not 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. This direct final
rule is also exempt from the Administrative Procedure Act pursuant to 5
U.S.C. 553(a)(2) because it applies to agency management or personnel.
G. 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.
H. Small Business Regulatory Enforcement Fairness Act
This direct final rule is also exempt from Congressional review
prescribed under 5 U.S.C. 801. This direct final rule is not a major
rule under 5 U.S.C. 804.
List of Subjects in 41 CFR Parts 302-1, 302-2, 302-4, and 302-17
Government employees, Income taxes, Travel and transportation
expenses.
Dated: November 18, 2019.
Emily W. Murphy,
Administrator, General Services Administration.
For the reasons set forth in the preamble, GSA amends 41 CFR parts
302-1, 302-2, 302-4, and 302-17 as set forth below:
PART 302-1--GENERAL RULES
0
1. The authority citation for 41 CFR part 302-1 continues to read as
follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a).
Sec. 302-1.1 [Amended]
0
2. Amend Sec. 302-1.1 by removing from paragraph (b) ``is at least 50
miles distant from your old duty station'' and adding ``meets the 50-
mile distance test'' in its place.
PART 302-2--EMPLOYEE ELIGIBILITY REQUIREMENTS
0
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).
0
4. Amend Sec. 302-2.6 by revising paragraph (b) to read as follows:
Sec. 302-2.6 May I be reimbursed for relocation expenses if I
relocate to a new official station that does not meet the 50-mile
distance test?
* * * * *
(b) The head of your agency or designee may authorize an exception
to the 50-mile threshold on a case-by-case basis when the authorized
official determines that it is in the best interest of the Government.
The determination must take into consideration such factors as
commuting time and distance between the employee's residence at the
time of notification of transfer and the new official station.
* * * * *
PART 302-4--ALLOWANCES FOR SUBSISTENCE AND TRANSPORTATION
0
5. The authority citation for 41 CFR part 302-4 is revised to read as
follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O 11609, 36 FR
13747, 3 CFR, 1971-1975 Comp., p. 586.
Sec. 302-4.300 [Amended]
0
6. Amend Sec. 302-4.300 by removing ``www.gsa.gov/relo'' from the last
sentence and adding ``https://gsa.gov/ftrbulletins'' in its place.
PART 302-17--TAXES ON RELOCATION EXPENSES
0
7. 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.
0
8. Amend Sec. 302-17.1 by revising the definition of ``Marginal tax
rate (MTR)'' to read as follows:
[[Page 64782]]
Sec. 302-17.1 What special terms apply to this part?
* * * * *
Marginal tax rate (MTR) means the tax rate that applies to the last
increment of taxable income after taxable relocation benefits have been
added to the employee's income. Examples of how to determine the
marginal tax rate using the IRS Tax Rate Schedules are published in an
FTR bulletin at https://gsa.gov/ftrbulletins.
* * * * *
Sec. 302-17.5 [Amended]
0
9. Amend Sec. 302-17.5 by removing ``from one permanent duty station
to another, in the interest of the Government'' and adding ``in the
interest of the Government from one official station or agency to
another'' in its place.
0
10. Amend Sec. 302-17.6 by revising paragraphs (b) and (c) and adding
paragraph (d) to read as follows:
Sec. 302-17.6 Who is not eligible for the WTA and the RITA?
* * * * *
(b) Assigned under the Government Employees Training Act;
(c) Returning from an overseas assignment for the purpose of
separation from Government service; or
(d) A Senior Executive Service (SES) employee making their last
move home for the purpose of separation from Government service.
0
11. Revise Sec. 302-17.8 to read as follows:
Sec. 302-17.8 What limitations and Federal income tax treatments
apply to various relocation reimbursements?
(a) Some relocation expenses reimbursed to you or paid directly by
the Government on or after January 1, 2018, and on or before December
31, 2025, must be reported as income and you cannot claim them as
deductible expenses on your Federal tax return.
(b) A table summarizing the FTR allowances, limitations, and tax
treatment of each reimbursement, allowance, or direct payment to a
service provider or vendor is published at https://gsa.gov/ftrbulletins. The table also cites relevant FTR paragraphs for details.
GSA will revise the table to reflect any changes as quickly as
possible; however, users of this part may wish to consult with a tax
advisor to determine what limitations and Federal income tax treatments
apply to your relocation reimbursement(s).
0
12. Revise Sec. 302-17.12 to read as follows:
Sec. 302-17.12 Where can I find additional information and guidance
on WTA and RITA?
GSA has published additional information on WTA and RITA, including
the illustrations and examples of various RITA computations, in FTR
Bulletins which are updated as necessary. GSA FTR Bulletins may be
found at https://gsa.gov/ftrbulletins.
0
13. Revise Sec. 302-17.21 to read as follows:
Sec. 302-17.21 What relocation expenses does the WTA cover?
The WTA covers certain allowances, reimbursements, and/or direct
payments to vendors, to the extent that each of them is taxable income.
In particular, the WTA covers:
(a) En route lodging, meals and incidental expenses--Reimbursements
for lodging, meals and incidental expenses while en route to the new
official station for you and your immediate family member(s). (See part
302-4 of this chapter).
(b) Transportation--Transportation expenses, to include commercial
air or privately owned vehicle, for you and your immediate family
member(s) transferred between official stations. (See part 302-4 of
this chapter).
(c) Househunting trip--Travel (including per diem and
transportation) expenses for you and/or your spouse for a round trip to
the new official station to seek permanent residence quarters.
Househunting is covered regardless of whether reimbursed under the per
diem allowance or lump sum method. (See part 302-5 of this chapter).
(d) Temporary quarters--Subsistence expenses for you and your
immediate family during occupancy of temporary quarters at the old or
new official station. Temporary quarters are covered regardless of
whether reimbursed under the actual expense or lump sum method. (See
part 302-6 of this chapter).
(e) Transportation and temporary storage of personal property--
Transportation and temporary storage of household goods (HHG) and at
Government expense for employees who transferred between official
stations. (See part 302-7 of this chapter).
(f) Extended storage--Extended storage of household goods for a
temporary change of station in CONUS or assignment to an isolated duty
station in CONUS. (See part 302-8 of this chapter).
(g) Transportation of privately owned vehicle--Transportation of a
privately owned vehicle at Government expense for employees who
transferred between official stations in CONUS. (See part 302-9 of this
chapter).
(h) Transportation of mobile homes and boats used as a primary
residence--Expenses for transportation of a mobile home or boat in lieu
of transportation of household goods to the new official station. (See
part 302-10 of this chapter).
(i) Real estate--Expenses for the sale of the residence at your old
official station and/or purchase of a home at your new official
station, when reimbursement is made directly to you. This can also
include expenses for settling an unexpired lease (``breaking'' a lease)
at your old official station. (See part 302-11 of this chapter. If you
or a member of your immediate family do not hold full title to the home
you are selling or buying, see Sec. 302-11.103 of this chapter).
(j) Relocation services company--Expenses paid by a relocation
services company to the extent such payments constitute taxable income
to the employee. The extent to which such payments constitute taxable
income varies according to the individual circumstances of your
relocation, and by the state and locality in which you reside. (See
appropriate state and local tax authorities for additional
information). (See also part 302-12 of this chapter).
(k) Property Management Services--Payment for the services of a
property manager for renting rather than selling a residence at your
old official station. (See part 302-15 of this chapter).
(l) Miscellaneous expense allowance--Miscellaneous expenses for
defraying certain relocation expenses not covered by other relocation
benefits. (See part 302-16 of this chapter).
0
14. Amend Sec. 302-17.22 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (e); and
0
c. Redesignating paragraphs (f) through (h) as paragraphs (e) through
(g).
The revision reads as follows:
Sec. 302-17.22 What relocation expenses does the WTA not cover?
* * * * *
(a) Any reimbursement, allowance, or direct payment to a vendor
that should not be reported as taxable income when you file your
Federal tax return; this includes but is not limited to expenses for
transportation of POVs for OCONUS assignments.
* * * * *
0
15. Revise Sec. 302-17.24 to read as follows:
Sec. 302-17.24 How does my agency compute my WTA?
Each time your agency pays a covered, taxable relocation expense,
[[Page 64783]]
regardless of whether it is a reimbursement, allowance, or direct
payment to a vendor, it is considered ``supplemental wages'' as defined
in 26 CFR 31.3402(g)-1(a) (see also IRS Publication 15, Employer's Tax
Guide). You owe taxes on the WTA itself because, like most other
relocation allowances, it is taxable income. To reimburse you for the
taxes on the WTA itself, your agency computes the WTA by using the
grossed-up withholding formula below and the appropriate supplemental
wage rate, as specified in IRS Publication 15. This rate, along with
examples of how to calculate the WTA, is published in an FTR bulletin
available at https://gsa.gov/ftrbulletins. The formula for calculating
the WTA is:
WTA = R/(1 - R) x Expense
Where R is the withholding rate for supplemental wages.
Note to Sec. 302-17.24: Your agency must deduct withholding for
FICA (Medicare and Social Security), as the WTA does not cover such
expenses.
Sec. 302-17.30 [Amended]
0
16. Amend Sec. 302-17.30 by removing from paragraph (a) ``25
percent''.
0
17. Amend Sec. 302-17.40 by adding a sentence to the end of paragraph
(b) and revising paragraph (c) to read as follows:
Sec. 302-17.40 How does my agency calculate my CMTR?
* * * * *
(b) * * * Examples of how to calculate the CMTR are published in an
FTR bulletin available at https://gsa.gov/ftrbulletins.
(c) The formula for calculating the CMTR is:
CMTR = F + (1 - F)S + (1 - F)L
Where:
F = Your Federal marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any
* * * * *
Sec. 302-17.60 [Amended]
0
18. Amend Sec. 302-17.60 by removing paragraph (d) and its
accompanying table.
0
19. Amend Sec. 302-17.61 by revising paragraph (b) to read as follows:
Sec. 302-17.61 Is the WTA optional under the two-year process?
* * * * *
(b) When deciding whether or not to receive the WTA, you should
consider the following:
(1) If you expect that your marginal Federal tax rate will be equal
to or higher than the supplemental wage rate for the calendar year in
which you received the majority of your relocation reimbursements, you
may want to elect to receive the WTA.
(2) If you expect that your marginal Federal tax rate will be less
than the supplemental wage rate for the calendar year in which you
received the majority of your relocation reimbursements, you may want
to decline receiving the WTA to avoid or limit possible overpayment of
the WTA, the so-called ``negative RITA'' situation. In a ``negative
RITA'' situation, you must repay some of the WTA in Year 2. However,
even if your marginal Federal tax rate will be less than the
supplemental wage rate, you may want to accept the WTA so that your
initial reimbursement is larger.
(3) Examples showing relocation allowances paid by accepting or
declining the WTA are published in an FTR bulletin available at https://gsa.gov/ftrbulletins.
Sec. 302-17.62 [Amended]
0
20. Amend Sec. 302-17.62 by removing the last sentence from paragraph
(b).
[FR Doc. 2019-25411 Filed 11-22-19; 8:45 am]
BILLING CODE 6820-14-P