PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE 4800 Mark Center Drive, Suite 04J2501 Alexandria, VA

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1 PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE 4800 Mark Center Drive, Suite 04J2501 Alexandria, VA PDTATAC/hm 30 May 2018 MEMORANDUM FOR SUBJECT: SEE DISTRIBUTION CTD for CAP ITEM (E) Taxes on Civilian Employee s Travel and Transportation Allowances and Relocation Expenses 1. SYNOPSIS: Removes references and details on the taxability of permanent change of station travel and transportation allowances and relocation expenses, and refers readers to the GSA Bulletin FTR 18-05, dated 14 May The GSA Bulletin is the initial implementing instructions for Public Law , commonly known as the Tax Cuts and Jobs Act of These changes are scheduled to appear in the JTR, dated 1 July This determination is effective on 30 May Action Officer: Mr. Henry Mitchell (henry.mitchell4.civ@mail.mil). //approved// Donna Haddix Chief, Policy & Regulations Branch Attachment: Rev 1 Civilian Distribution: CAP Members P&R Branch PMO-DTS GSA-3FT GSA-OGP(MTT) DTMO CBCA Judges

2 JTR REVISIONS: Relocation Income Tax (RIT) Allowance A RIT allowance reimburses a civilian employee for the majority of the additional income taxes incurred from the reimbursement of taxable relocation allowances. A RIT allowance applies to Federal, state, and local income taxes incurred by the civilian employee or by the civilian employee and spouse, but not by a domestic partner. A RIT allowance does not reimburse for employment-type taxes, such as those imposed by Federal Insurance Contributions Act or the Federal Unemployment Tax Act. A Withholding Tax Allowance (WTA) acts as an advance on a RIT. See FTR, Part , and GSA Bulletin FTR 18-05, dated May 14, 2018 for details on taxable PCS allowances and computation methods Lodging and Per Diem B. Lump Sum. A DoD Component may offer to pay a lump sum for subsistence expenses. Once the civilian employee signs a service agreement and accepts the HHT (lump sum) offer, then HHT (lump sum) is irrevocable. A civilian employee paid for an HHT using the lump sum method does not require itemization, receipts for payment, or a cost comparison. If the civilian employee and spouse both travel together or separately the lump sum amount is calculated by multiplying 6.25 by the applicable locality per diem rate. If only one person either the civilian employee or the spouse travels, multiply 5 by the applicable locality per diem rate. The lump sum determined with that calculation applies for the entire trip, regardless of the number of days authorized for the HHT. Any balance from the HHT lump sum payment that the civilian employee does not use for expenses belongs to the civilian employee and is not subject to repayment to the Government.; however, that remaining balance may be taxable. The following are factors in determining whether to offer lump sum reimbursement: Table Lodging and Per Diem Allowance for an HHT Computation Method One Civilian Employee or Spouse Civilian Employee and Spouse 1 Lodging Plus Use the Standard CONUS per diem rate as specified in Section 0203 and par The per diem rate for the spouse is 75% of the civilian employee s per diem rate when they travel together. 2 Lump Sum Multiply 5 by the applicable locality per diem rate. 1. ***** Multiply 6.25 by the applicable locality per diem rate whether both travel together or separately Income Tax Consequences of Property Management Services The IRS, state, and local authorities determine the effect on a civilian employee s taxes due to reimbursement of expenses for property management services that the Government pays a relocation services company or reimburses a civilian employee. The DoD Component must pay the civilian employee a RIT allowance for additional Federal, state, and local income taxes incurred on expenses paid for property management. A civilian employee should consult with a tax advisor to determine the tax consequences of these payments and on maintaining the residence as a rental property.

3 Home Marketing Incentive Payments (HMIP) The Home Marketing Incentive Payment (HMIP) significantly reduces the fees and expenses a DoD Component pays to a relocation services company and effectively lowers the relocation program cost. The DoD Component must pay a reduced fee or reduced expenses to the relocation company due to the civilian employee s independent marketing efforts. A civilian employee enrolled in the Home Sale Program is limited to the payment limitations in par D. Subsequent reimbursement is not authorized for real estate transaction and unexpired lease expense allowances or property management services after enrolling in the Home Sale Program. A DoD Component may offer a home marketing incentive to a civilian employee who is authorized to transfer and who meets the requirements for a residence sale with Government-reimbursed expenses. An HMIP is at the discretion of each DoD Agency. An HMIP may be authorized for a civilian employee of the Air Force only if he or she is traveling under Civilian Career funding. A. Definitions 1. Amended Value Sale. An Amended Value Sale is a home sale transaction that occurs when the relocating civilian employee receives a bona fide offer from a qualified potential buyer before the civilian employee has accepted an appraised value offer from the relocation services company. The relocation services company amends its offer to match the net outside sale price. 2. Appraised Value Sale. An Appraised Value Sale is a type of home sale transaction that occurs when the relocating civilian employee accepts the offer from the relocation services company to buy the civilian employee s home based upon the average of a specific number of appraisals conducted by designated certified appraisers. 3. Buyer Value Option. A Buyer Value Option is a home sale transaction with procedures the same as the amended value program except that the buy-out offer from the relocation services company is based on a bona fide offer received by the civilian employee from a qualified buyer after marketing by the civilian employee and before appraisals being ordered. Once the offer is determined to be bona fide, the relocation services company offers to buy the home from the civilian employee at a price based on the outside sale price. 4. Home Marketing Incentive Payment (HMIP). A Home Marketing Incentive Payment is a payment made to a transferred civilian employee to encourage the civilian employee to independently and aggressively market the civilian employee s residence and find a qualified potential buyer. 5. Home Sale Program. A Home Sale Program is a program under which a relocation services company, under contract with DoD, purchases a transferred civilian employee s residence at the higher of either a market based or appraised value offer, then independently markets, and sells the residence. B. Income Tax Consequences. Subject to IRS, state, and local requirements, an HMIP is income. A DoD Component must withhold, and the civilian employee may be liable for, federal, state, and local income taxes. No authority exists to pay a withholding tax allowance or a RIT allowance to offset the Federal, state, and local income taxes on the incentive payment. CB. Payment Conditions. To qualify for an HMIP, a civilian employee must:

4 1. Enter the residence in the DoD Component s home sale program. 2. Independently and aggressively market the residence. 3. Find a buyer for the residence through independent marketing efforts. the sale. 4. Transfer the residence to the relocation company the buyer uses to complete 5. Meet any additional requirements established by the DoD Component. DC. Payment Limitations. The DoD Component determines the HMIP amount. If there are no savings, a home-marketing incentive may not be paid. See the DTMO website for examples. If it is paid, the payment is limited to the least of: 1. $10, One-half of the savings from the reduced fee expenses paid due to the civilian employee finding a bona fide buyer with whom the relocation services company closes the sale. 3. An amount within 1 to 5% of the price the relocation services company paid when it purchased the residence from the civilian employee. ED. Authorized HMIP Offices. Each DoD Component and Agency must determine whether an HMIP is authorized and make certain each affected civilian employee knows who to contact for information. The offices delegated the authority to authorize an HMIP are in Table 5-96 (FTR (c)). Table Delegated Offices for HMIP Authorization Service Authority 1 Army A commander of an Army Command, commander of an Army Service Component Command, Commander or Superintendent of a Direct Reporting Unit, and the Administrative Assistant to the Secretary of the Army (AASA). For purposes of this designation, the Principal Officials of Headquarters, Department of the Army, their staff and other elements, including Field Operating Agencies, Staff Support Agencies, and those Direct Reporting Units not listed, including the U.S. Army Acquisition Support Center, fall under the purview of the AASA. This authority may be redelegated at the commander or Agency head s discretion, but no lower than the local commander or activity head. 2 Navy Major Claimants. 3 Air Force* AFPC/DPIFSA 555 E. Street West, STE 1 Randolph AFB, TX Marine Corps The heads of Marine Corps activities and commands. *Only a civilian employee traveling under Civilian Career funding may be authorized ***** Short-Distance Transfers

5 PCS claims for allowances authorized in an order must satisfy the requirements in this paragraph before reimbursement is allowed. Restrictions in this paragraph do not apply to first duty-station travel. A. 50-Mile Distance Test. When a PCS is in the Government s interest, an AO may authorize or approve PCS travel and transportation allowances to a new PDS that meets the 50-mile distance test and results in a residence relocation. Ordinarily, a residence relocation is not for a PCS unless the civilian employee s proposed new residence is closer to the new PDS than the residence from which he or she commuted daily to the old PDS. If the civilian employee changes the proposed new residence location, the AO must review the change for compliance with these criteria. Non-compliance of the new residence location is grounds for denial of the various allowances. 1. The 50-mile distance test is met when the distance to new PDS from the civilian employee s current residence is at least 50 miles further than the distance between the old PDS and that same residence. The distance is the shortest of the commonly traveled routes between the PDS and the residence. 2. The AO must consider commuting time and distance between the residence at the time of PCS notification and the old PDS and new PDS and the time and distance between the proposed new residence and the new PDS to determine that the residence relocation is for a PCS. B. Exception to Distance Requirement and Tax Impact. On a case-by-case basis, the AO may authorize PCS expense reimbursement for PCS moves of less than 50 miles when the move is in the Government s interest. In addition, a specified exception may be authorized (for example, BRAC) through the Secretarial Process. All reimbursed expenses are taxable income, and the RIT applies.