B-121724, DECEMBER 14, 1954, 34 COMP. GEN. 290

B-121724, DECEMBER 14, 1954, 34 COMP. GEN. 290

LEAVES OF ABSENCE - LUMP-SUM PAYMENTS - REEMPLOYMENT PRIOR TO RECEIPT OF LUMP-SUM - INCOME TAX WITHHOLDING EMPLOYEES WITH ANNUAL LEAVE TO THEIR CREDIT WHO ARE SEPARATED FROM ONE AGENCY AND REEMPLOYED BY ANOTHER PRIOR TO THE PROCESSING THE LUMP SUM LEAVE PAYMENTS MAY BE PAID THAT PORTION OF LEAVE WHICH EXPIRED DURING THE INTERVAL BETWEEN EMPLOYMENTS LESS INCOME TAX DEDUCTION COMPUTED ON SUCH AMOUNT AND HAVE THE UNEXPIRED LEAVE TRANSFERRED, WITHOUT INCOME TAX DEDUCTION, TO THE REEMPLOYING AGENCY IN ACCORDANCE WITH THE ACT OF JULY 2, 1953, WHICH AMENDS THE LUMP-SUM LEAVE ACT OF 1944. B-59923, AUG. 30, 1946 AND B-59278, SEPT. 19, 1946, MODIFIED.

ACTING COMPTROLLER GENERAL WEITZEL TO THE ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY, DECEMBER 14, 1954:

THERE HAS BEEN CONSIDERED THE LETTER OF AUGUST 31, 1954, FROM THE COMPTROLLER, PUBLIC HOUSING ADMINISTRATION, TO THE DIRECTOR, ACCOUNTING SYSTEMS DIVISION, GENERAL ACCOUNTING OFFICE, REQUESTING TO BE ADVISED CONCERNING THE PROPRIETY OF A PROPOSED LUMP-SUM PAYMENT FOR ANNUAL LEAVE TO A FORMER EMPLOYEE OF THE ADMINISTRATION. THE LETTER IS IN PERTINENT PART AS FOLLOWS:

AN EMPLOYEE OF THIS ADMINISTRATION WAS SEPARATED BY REDUCTION IN FORCE COB 7/31/54 WITH 720 HOURS OF ANNUAL LEAVE TO HIS CREDIT. BEFORE THE LUMP -SUM CHECK FOR $2,235.42 GROSS, COVERING THE PERIOD 8/1 THRU COB 12/8/54 WAS DRAWN, THIS OFFICE WAS NOTIFIED BY THE VETERANS ADMINISTRATION OF THE EMPLOYEE'S ENTRANCE ON DUTY WITH THEIR INSTALLATION, EFFECTIVE 8/16/54.

THIS OFFICE PROPOSES TO PAY THE EMPLOYEE $195.55 COMPUTED AS FOLLOWS: GROSS ------------------------------------------------------- - $2,235.42 LESS: DUAL COMPENSATION --------------------------------- - 1,995.04

NET ------------------------------------------------------ 240.38 DEDUCT

WITHHOLDING TAX (1FEDERAL) -------------- $42.43

WITHHOLDING TAX (1STATE OF OREGON) ----- 2.40

44.83

NET ------------------------------------------------------ 195.55

THIS PAYMENT COVERS THE PERIOD AUGUST 1, 1954 THROUGH AUGUST 15, 1954, DURING WHICH THERE WAS A BREAK IN SERVICE. * * *

THE DECISIONS OF THIS OFFICE CONTROLLING GENERALLY THE METHOD OF PAYMENT IN THIS CLASS OF CASES ARE B-59923, DATED AUGUST 30, 1946, AND B-59278, DATED SEPTEMBER 19, 1946, WHICH HOLD TO THE EFFECT THAT PAYMENT (UNDER SIMILAR CIRCUMSTANCES) IS REQUIRED TO BE MADE TO AN EMPLOYEE FOR THAT PERIOD BETWEEN THE DATE OF HIS SEPARATION AND THE DATE OF HIS REEMPLOYMENT IN ANOTHER AGENCY, LESS THE ENTIRE AMOUNT OF WITHHOLDING TAX WHICH WOULD HAVE BEEN WITHHELD HAD PAYMENT BEEN PROCESSED IN THE FULL AMOUNT OTHERWISE PAYABLE ON THE DATE OF THE EMPLOYEE'S SEPARATION--- ANY REFUND OF TAX DUE THE EMPLOYEE BY REASON OF THE DEDUCTION OF THE ENTIRE WITHHOLDING TAX BEING FOR ADJUSTMENT BETWEEN THE EMPLOYEE AND THE BUREAU OF INTERNAL REVENUE.

WHILE THE LETTER FROM THE COMPTROLLER, PUBLIC HOUSING ADMINISTRATION, DOES NOT MENTION THE ABOVE-CITED DECISIONS, ANY CONSIDERATION OF THE PROPOSAL IN HIS LETTER WOULD REQUIRE A REVIEW OF THOSE DECISIONS, WHICH, OF COURSE, COULD NOT BE MADE AT HIS REQUEST, BUT SINCE THERE HAS COME TO MY ATTENTION CERTAIN HARDSHIPS TO EMPLOYEES RESULTING FROM THE APPLICATION OF THE RULE SET FORTH IN THE REFERRED-TO DECISIONS AND IN VIEW OF OTHER REASONS HEREINAFTER RECITED, I DEEM IT APPROPRIATE AT THIS TIME TO REVIEW THE MATTER AND RENDER A DECISION DIRECT TO YOU AS HEAD OF THE AGENCY.

AT THE TIME THE CITED DECISIONS WERE RENDERED IT WAS THOUGHT THAT SITUATIONS OF THIS NATURE WOULD BE RELATIVELY FEW AND THE AMOUNTS INVOLVED RATHER INSIGNIFICANT AND THUS READILY ADJUSTABLE IN THE EMPLOYEE'S TAX RETURN. HOWEVER, CONTRARY TO EXPECTATIONS, IT IS UNDERSTOOD THAT MANY CASES ARISE OUT OF REDUCTIONS IN FORCE WHERE SEPARATED EMPLOYEES--- PRIOR TO THEIR RECEIVING LUMP-SUM LEAVE PAYMENTS -- WERE REEMPLOYED WITHIN A FEW DAYS AFTER THEIR SEPARATIONS AT SUBSTANTIAL REDUCTIONS IN SALARY. THE APPLICATION OF THE RULE IN REQUIRING AN EMPLOYEE TO BE RESPONSIBLE FOR THE ENTIRE WITHHOLDING TAX APPLICABLE TO THE FULL LUMP-SUM PAYMENT HAS RESULTED IN THE EMPLOYEES BEING INDEBTED TO THE GOVERNMENT WHERE, AS HERE, THE WITHHOLDING TAX ON THE TOTAL VALUE OF THE LEAVE EXCEEDS THE VALUE OF THE EXPIRED PORTION OF THE LEAVE. ALSO, IT HAS BEEN SUGGESTED THAT THE NECESSITY FOR EMPLOYEES TO FILE CLAIMS WITH THE INTERNAL REVENUE SERVICE FOR REFUNDS UNDER CIRCUMSTANCES SIMILAR TO THAT HERE INVOLVED IS NOT CONSISTENT WITH THE EFFORTS OF THAT SERVICE TO KEEP TAX REFUND CASES TO A MINIMUM. THE METHOD OF PAYMENT HERE PROPOSED BY THE COMPTROLLER WOULD PERMIT THESE SITUATIONS TO BE HANDLED BY ADJUSTMENT BETWEEN THE VARIOUS FUNDS INVOLVED AND WOULD PERMIT THE EMPLOYEE TO BE PAID THE NET AMOUNT FOR THE EXPIRED PORTION OF HIS ANNUAL LEAVE, THUS ELIMINATING ANY NECESSITY FOR A CLAIM BEING FILED WITH THE INTERNAL REVENUE SERVICE FOR A REFUND OF EXCESS TAX DEDUCTION.

IN VIEW OF THE FOREGOING CONSIDERATIONS, AND AS THE INTEREST OF THE UNITED STATES WILL NOT BE ADVERSELY AFFECTED THEREBY, THIS OFFICE NO LONGER WILL REQUIRE AN EMPLOYEE TO BE RESPONSIBLE FOR THE WITHHOLDING TAX ON THE FULL AMOUNT OF THE LUMP-SUM PAYMENT WHICH WOULD HAVE BEEN MADE HAD THE SEPARATED EMPLOYEE NOT BEEN REEMPLOYED. RATHER, THE AMOUNT OF THE WITHHOLDING TAX SHOULD BE COMPUTED ONLY UPON THE GROSS AMOUNT TO WHICH THE EMPLOYEE ACTUALLY IS ENTITLED FOR THE INTERIM PERIOD BETWEEN HIS SEPARATION AND REEMPLOYMENT--- SUCH AS IS PROPOSED IN THE COMPTROLLER'S LETTER. THE DIFFERENCE BETWEEN THE GROSS AMOUNT DUE THE EMPLOYEE AND THE GROSS VALUE OF THE TOTAL LEAVE CREDIT IS TO BE TRANSFERRED TO THE REEMPLOYING AGENCY IN ACCORDANCE WITH THE ACT OF JULY 2, 1953, PUBLIC LAW 102, 67 STAT. 136, AMENDING THE LUMP SUM LEAVE ACT OF DECEMBER 21, 1944, 58 STAT. 845.

THUS, THE PROPOSAL CONTAINED IN THE LETTER DATED AUGUST 31, 1954, FROM THE COMPTROLLER, PUBLIC HOUSING ADMINISTRATION, IS APPROVED, AND THE DECISIONS OF AUGUST 30, 1946, AND SEPTEMBER 19, 1946, ARE MODIFIED ACCORDINGLY.