B-125762, FEBRUARY 14, 1956, 35 COMP. GEN. 452
Highlights
LEAVES OF ABSENCE - LUMP-SUM PAYMENTS - REFUNDS UPON REEMPLOYMENT - INCOME TAX WITHHOLDING IN THE COMPUTATION OF THE BACK PAY DUE AN EMPLOYEE WHO WAS SEPARATED FROM THE SERVICE IN ONE CALENDAR YEAR AND OFFERED RETROACTIVELY RESTORED TO DUTY IN A SUBSEQUENT YEAR. WHERE THE EMPLOYEE WAS SEPARATED IN ONE CALENDAR YEAR AND WAS RESTORED TO SERVICE IN ANOTHER CALENDAR YEAR. THE PERTINENT FACTS ARE STATED IN THE LETTER AS FOLLOWS: * * * THIS EMPLOYEE WAS SEPARATED FROM THE SERVICE ON APRIL 23. 560 PER ANNUM) WAS PAID A LUMP SUM OF $3. HIS SALARY IN THAT AGENCY WAS AT THE RATE OF $7. THE EMPLOYEE WAS RESTORED TO HIS POSITION IN THIS DEPARTMENT AS OF APRIL 23. PROVIDES THAT THE EMPLOYEE SHALL BE DEEMED TO HAVE RENDERED SERVICE DURING THE PERIOD BETWEEN SEPARATION AND RESTORATION.
B-125762, FEBRUARY 14, 1956, 35 COMP. GEN. 452
LEAVES OF ABSENCE - LUMP-SUM PAYMENTS - REFUNDS UPON REEMPLOYMENT - INCOME TAX WITHHOLDING IN THE COMPUTATION OF THE BACK PAY DUE AN EMPLOYEE WHO WAS SEPARATED FROM THE SERVICE IN ONE CALENDAR YEAR AND OFFERED RETROACTIVELY RESTORED TO DUTY IN A SUBSEQUENT YEAR, THE LUMP-SUM LEAVE PAYMENT MADE IN THE PRIOR YEAR SHOULD BE DEDUCTED ONLY AFTER THE WITHHOLDING TAX HAS BEEN COMPUTED ON THE AMOUNT OF RETROACTIVE COMPENSATION LESS THE INTERIM NET EARNINGS.
TO THE SECRETARY OF AGRICULTURE, FEBRUARY 14, 1956:
ON OCTOBER 11, 1955, THE ADMINISTRATIVE ASSISTANT SECRETARY REQUESTED OUR DECISION REGARDING THE PROPER METHOD OF COMPUTING THE COMPENSATION DUE AN EMPLOYEE UNDER THE ACT OF AUGUST 24, 1912, AS AMENDED, 5 U.S.C. 652, WHERE THE EMPLOYEE WAS SEPARATED IN ONE CALENDAR YEAR AND WAS RESTORED TO SERVICE IN ANOTHER CALENDAR YEAR.
THE PERTINENT FACTS ARE STATED IN THE LETTER AS FOLLOWS:
* * * THIS EMPLOYEE WAS SEPARATED FROM THE SERVICE ON APRIL 23, 1954. THAT TIME, THE EMPLOYEE (GS-13, $8,560 PER ANNUM) WAS PAID A LUMP SUM OF $3,028.99 FOR ACCRUED LEAVE. ON JULY 12, 1954, THE EMPLOYEE OBTAINED A POSITION WITH ANOTHER GOVERNMENT AGENCY AND MADE A REFUND FOR THE UNEXPIRED PORTION OF HIS LEAVE FOR WHICH HE HAD RECEIVED A LUMP SUM PAYMENT. HIS SALARY IN THAT AGENCY WAS AT THE RATE OF $7,750 PER ANNUM. ON APRIL 1, 1955, THE EMPLOYEE LEFT THE OTHER GOVERNMENT AGENCY AFTER HAVING RECEIVED $5,663.52 IN REGULAR SALARY PAYMENTS IN ADDITION TO A LUMP SUM LEAVE PAYMENT. ON JUNE 1, 1955, THE EMPLOYEE WAS RESTORED TO HIS POSITION IN THIS DEPARTMENT AS OF APRIL 23, 1954. * * *
THE LETTER POINTS OUT THAT THE ACT OF JUNE 10, 1948, 62 STAT. 354, PROVIDES THAT THE EMPLOYEE SHALL BE DEEMED TO HAVE RENDERED SERVICE DURING THE PERIOD BETWEEN SEPARATION AND RESTORATION, AND SUGGESTS THAT THE LUMP- SUM PAYMENT MAY BE TREATED AS SALARY ON ACCOUNT OF HIS HAVING "RENDERED SERVICE" AND THE AMOUNT DUE THE EMPLOYEE COMPUTED IN THE FOLLOWING MANNER:
* * * SET UP THE GROSS AMOUNT TO WHICH HE WAS ENTITLED, DEDUCT THEREFROM THE AMOUNT HE EARNED FROM OTHER EMPLOYMENT AND THE AMOUNT WHICH HE HAS ALREADY BEEN PAID * * * FOR LUMP SUM LEAVE, CALCULATE THE WITHHOLDING TAX ON THE REMAINING SUM AND THEN, AFTER MAKING THE OTHER USUAL DEDUCTIONS, PAY HIM THE BALANCE, IF ANY * * *.
SPECIFICALLY, THE QUESTION PRESENTED IS WHETHER THE PROCEDURE THUS SUGGESTED IS PROPER.
AN EMPLOYEE RESTORED TO THE SERVICE UNDER 5 U.S.C. 652 SHOULD BE COMPENSATED FOR THE PERIOD OF UNJUSTIFIED SEPARATION AT THE SALARY RATE HE WAS RECEIVING ON THE DATE OF REMOVAL LESS THE AMOUNT OF INTERIM EARNINGS AND OTHER APPROPRIATE DEDUCTIONS. THE GROSS AMOUNT OF ANY LUMP-SUM LEAVE PAID AT THE TIME OF REMOVAL SHOULD ALSO BE DEDUCTED. 34 COMP. GEN. 657. QUESTIONS INVOLVING THE WITHHOLDING OF INCOME TAXES ARE FOR CONSIDERATION BY THE COMMISSIONER OF INTERNAL REVENUE AND NOT BY OUR OFFICE. 24 COMP. GEN. 511, 154; 34 ID. 657. WE HAVE BEEN INFORMED BY THE OFFICE OF THE COMMISSIONER OF INTERNAL REVENUE THAT WHERE AN EMPLOYEE IS SEPARATED AND RECEIVES A LUMP-SUM LEAVE PAYMENT IN ONE CALENDAR YEAR AND IS RESTORED OR REEMPLOYED IN A SUBSEQUENT YEAR, WITHHOLDING TAX SHOULD BE COMPUTED ON THE AMOUNT OF RETROACTIVE COMPENSATION LESS ONLY THE AMOUNT OF INTERIM EARNINGS WITHOUT REGARD TO THE LUMP-SUM LEAVE PAYMENT REFUND. IN OTHER WORDS, THE LUMP-SUM LEAVE PAYMENT REFUND IS DEDUCTED ONLY AFTER THE WITHHOLDING TAX HAS BEEN COMPUTED. IT APPEARS, ON THE BASIS OF THE INFORMATION FROM THE BUREAU OF INTERNAL REVENUE, THAT THE LUMP SUM PAID TO THE EMPLOYEE IN THE YEAR IN WHICH HE IS RESTORED MAY BE DEDUCTED FROM ANY COMPENSATION DUE PRIOR TO THE COMPUTATION OF THE WITHHOLDING TAX, BUT THAT THE LUMP SUM PAID IN A PRIOR YEAR AND NOT PREVIOUSLY REFUNDED SHOULD BE DEDUCTED ONLY AFTER THE WITHHOLDING TAX HAS BEEN COMPUTED.
REGARDING THE SUGGESTION THAT THE LUMP-SUM PAYMENT BE TREATED AS SALARY, ATTENTION IS DIRECTED TO THE ACT OF DECEMBER 21, 1944, 58 STAT. 845, 5 U.S.C. 61B, WHICH AUTHORIZES A LUMP-SUM LEAVE PAYMENT UPON SEPARATION, AND PROVIDES IN PART:
* * * THAT THE LUMP-SUM PAYMENT HEREIN AUTHORIZED SHALL NOT BE REGARDED, EXCEPT FOR PURPOSES OF TAXATION, AS SALARY OR COMPENSATION * * *.
ALSO, IN THE LETTER NOTE IS MADE THAT SOME OF OUR DECISIONS REGARDING THE REPAYMENT OF LUMP SUMS FOR LEAVE PROVIDE THAT THE AMOUNT BE "DEDUCTED," 28 COMP. GEN. 333, 336, WHILE OTHER DECISIONS REQUIRE A "REFUND.' 34 COMP. GEN. 303. THE ACT OF DECEMBER 21, 1944, SUPRA, PROVIDES THAT THE EMPLOYEE SHALL "REFUND" THE AMOUNT. SUCH REFUND, HOWEVER, MAY BE OBTAINED BY MEANS OF A DEDUCTION FROM THE NET AMOUNT DUE THE EMPLOYEE WHERE THE STATE OF ACCOUNTS BETWEEN THE GOVERNMENT AND THE EMPLOYEE PERMITS SUCH A TRANSACTION. 26 COMP. GEN. 259. THUS THE WORDS "DEDUCT" AND "REFUND" ARE USED IN THE SAME SENSE.
THERE IS ATTACHED FOR YOUR INFORMATION A COPY OF THE LETTER DATED JANUARY 9, 1956, FROM THE COMMISSIONER OF INTERNAL REVENUE.