B-180005, MAY 20, 1974

B-180005: May 20, 1974

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DEDUCTION WAS PROPER SINCE 26 U.S.C. 217(C) TREATS RELOCATION ALLOWANCES FOR MOVES OF LESS THAN 50 MILES DISTANCE AS WAGES AND. ENTIRE AMOUNT PAID WAS SUBJECT TO TAX WITHHOLDING. EBERT: THIS ACTION IS A RECONSIDERATION OF SETTLEMENT OF JUNE 21. THE AMOUNT OF $245.32 WAS DEDUCTED FOR FEDERAL INCOME TAX PURPOSES. THE CLAIMANT CONTENDS THE AMOUNT WITHHELD IS EXCESSIVE AND MAINTAINS THAT THE $200 MISCELLANEOUS EXPENSE ALLOWANCE IS ALONE SUBJECT TO WITHHOLDING AND THAT ALL OTHER RELOCATION EXPENSES ARE NOT INCOME TO HIM BUT ARE ACTUALLY REIMBURSEMENTS OF OUT OF-POCKET EXPENSES AND ARE. FEDERAL INCOME TAX TREATMENT OF RELOCATION ALLOWANCES IS COVERED BY 26 U.S.C. 217 WHICH PROVIDES IN PERTINENT PART AS FOLLOWS: "SEC 217.

B-180005, MAY 20, 1974

EMPLOYEE PERMANENTLY TRANSFERRED LESS THAN 50 MILES FROM FORMER DUTY STATION QUESTIONS DEDUCTION OF $245.32 FOR FEDERAL WITHHOLDING TAX FROM $1,248.48 ALLOWED IN SETTLEMENT OF HIS CLAIM FOR RELOCATION EXPENSES BY THIS OFFICE. DEDUCTION WAS PROPER SINCE 26 U.S.C. 217(C) TREATS RELOCATION ALLOWANCES FOR MOVES OF LESS THAN 50 MILES DISTANCE AS WAGES AND, THEREFORE, ENTIRE AMOUNT PAID WAS SUBJECT TO TAX WITHHOLDING.

TO MR. CHARLES L. EBERT:

THIS ACTION IS A RECONSIDERATION OF SETTLEMENT OF JUNE 21, 1973, BY THE TRANSPORTATION AND CLAIMS DIVISION OF OUR OFFICE, WHICH ALLOWED THE CLAIM OF MR. CHARLES L. EBERT, AN EMPLOYEE OF THE DEPARTMENT OF THE AIR FORCE, FOR RELOCATION EXPENSES IN THE AMOUNT OF $1,248.48 INCIDENT TO HIS PERMANENT CHANGE OF STATION FROM LOCKBOURNE AIR FORCE BASE (AFB), OHIO, TO WORTHINGTON, OHIO. THE AMOUNT OF $245.32 WAS DEDUCTED FOR FEDERAL INCOME TAX PURPOSES. THE CLAIMANT CONTENDS THE AMOUNT WITHHELD IS EXCESSIVE AND MAINTAINS THAT THE $200 MISCELLANEOUS EXPENSE ALLOWANCE IS ALONE SUBJECT TO WITHHOLDING AND THAT ALL OTHER RELOCATION EXPENSES ARE NOT INCOME TO HIM BUT ARE ACTUALLY REIMBURSEMENTS OF OUT OF-POCKET EXPENSES AND ARE, THEREFORE, NOT SUBJECT TO FEDERAL WITHHOLDING TAX. IN SUPPORT OF HIS CONTENTION MR. EBERT STATES THAT DISCUSSIONS WITH PERSONNEL OF THE ACCOUNTING AND FINANCE OFFICE, LOCKBOURNE AFB, REVEAL THAT THAT OFFICE DOES NOT NORMALLY WITHHOLD TAX FROM RELOCATION EXPENSE ALLOWANCE CLAIMS, EXCEPT IN THE CASE OF MISCELLANEOUS EXPENSE ALLOWANCES.

FEDERAL INCOME TAX TREATMENT OF RELOCATION ALLOWANCES IS COVERED BY 26 U.S.C. 217 WHICH PROVIDES IN PERTINENT PART AS FOLLOWS:

"SEC 217. MOVING EXPENSES

"(A) DEDUCTION ALLOWED. - THERE SHALL BE ALLOWED AS A DEDUCTION MOVING EXPENSES PAID OR INCURRED DURING THE TAXABLE YEAR IN CONNECTION WITH THE COMMENCEMENT OF WORK BY THE TAXPAYER AS AN EMPLOYEE OR AS A SELF-EMPLOYED INDIVIDUAL AT A NEW PRINCIPAL PLACE OF WORK.

"(C) CONDITIONS FOR ALLOWANCE. - NO DEDUCTION SHALL BE ALLOWED UNDER THIS SECTION UNLESS -

"(1) THE TAXPAYER'S NEW PRINCIPAL PLACE OF WORK -

"(A) IS AT LEAST 50 MILES FARTHER FROM HIS FORMER RESIDENCE THAN WAS HIS FORMER PRINCIPAL PLACE OF WORK, OR

"(B) IF HE HAD NO FORMER PRINCIPAL PLACE OF WORK, IS AT LEAST 50 MILES FROM HIS FORMER RESIDENCE ***

FOR PURPOSES OF PARAGRAPH (1), THE DISTANCE BETWEEN TWO POINTS SHALL BE THE SHORTEST OF THE MORE COMMONLY TRAVELED ROUTES BETWEEN SUCH TWO POINTS."

CHAPTER 24 OF TITLE 26, U.S.C. ENTITLED COLLECTION OF INCOME TAX AT SOURCE ON WAGES, PROVIDES FOR WHAT IS COMMONLY KNOWN AS WITHHOLDING. THAT CHAPTER CONTAINS THE FOLLOWING PERTINENT PROVISIONS:

"SEC 3401. DEFINITIONS

"(A) WAGES. - FOR PURPOSES OF THIS CHAPTER, THE TERM 'WAGES' MEANS ALL REMUNERATION (OTHER THAN FEES PAID TO A PUBLIC OFFICIAL) FOR SERVICES PERFORMED BY AN EMPLOYEE FOR HIS EMPLOYER, INCLUDING THE CASH VALUE OF ALL REMUNERATION PAID IN ANY MEDIUM OTHER THAN CASH; EXCEPT THAT SUCH TERM SHALL NOT INCLUDE REMUNERATION PAID -

"(15) TO OR ON BEHALF OF AN EMPLOYEE IF (AND TO THE EXTENT THAT) AT THE TIME OF THE PAYMENT OF SUCH REMUNERATION IT IS REASONABLE TO BELIEVE THAT A CORRESPONDING DEDUCTION IS ALLOWABLE UNDER SECTION 217 ***

SECTION 3402 OF THAT CHAPTER PROVIDES THAT EVERY EMPLOYER MAKING PAYMENT OF WAGES SHALL DEDUCT AND WITHHOLD A TAX DETERMINED IN ACCORDANCE WITH THE PROVISIONS AND TABLES INCLUDED IN THAT SECTION.

THE COMMANDER, 301ST COMBAT SUPPORT GROUP (SAC), LOCKBOURNE AFB, OHIO, THE ORDER ISSUING AUTHORITY IN THIS CASE, HAS REPORTED TO US THAT THE DISTANCE BETWEEN MR. EBERT'S FORMER RESIDENCE AT PLEASANTVILLE, OHIO, AND HIS FORMER PLACE OF WORK AT LOCKBOURNE AFB, IS APPROXIMATELY 34 MILES, WHILE THE DISTANCE BETWEEN HIS FORMER RESIDENCE AND HIS NEW PLACE OF WORK AT GENERAL BEIGHTLER ARMORY, WORTHINGTON, OHIO, IS APPROXIMATELY 47 MILES, A DIFFERENCE OF 13 MILES. INASMUCH AS THE EMPLOYEE'S NEW PLACE OF WORK IS NOT AT LEAST 50 MILES FARTHER FROM HIS FORMER RESIDENCE THAN IS HIS FORMER PLACE OF WORK, THE RELOCATION ALLOWANCE WOULD NOT APPEAR TO QUALIFY AS A DEDUCTION UNDER PROVISIONS OF 26 U.S.C. 217. ACCORDINGLY, SUCH ALLOWANCE MUST BE TREATED AS WAGES AND IS, THEREFORE, SUBJECT TO WITHHOLDING. 176726, JANUARY 19, 1973; B-171436, FEBRUARY 22, 1971.

THE AMOUNT WITHHELD IS, OF COURSE, SUBJECT TO ADJUSTMENT IN CONNECTION WITH THE INCOME TAX RETURNS FILED BY THE EMPLOYEE.

IN LIGHT OF THE FOREGOING, THE ACTION OF THE TRANSPORTATION AND CLAIMS DIVISION IN WITHHOLDING THE AMOUNT IN QUESTION MUST BE SUSTAINED.