B-174030, NOV 11, 1971

B-174030, NOV 11, 1971

CIVILIAN PERSONNEL - PURCHASE OF RESIDENCE - LEGAL FEES - SURTAX CHARGE DECISION ALLOWING IN PART REIMBURSEMENT TO MR. JERRY M. BENNETT REPRESENTING CERTAIN CHARGES INCURRED INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION. FOR ALLOWANCE IS $217.50, FORMERLY INCLUDED AS PART OF THE PREPAID FINANCE CHARGE, BUT NOW CLARIFIED TO REPRESENT LEGAL FEES PAID TO ATTORNEYS REPRESENTING THE MORTGAGEE FOR PREPARATION OF REQUIRED MORTGAGE DOCUMENTS. IT IS THEREFORE FOR CONSIDERATION UNDER SEC. 4.2C OF OMB CIR. NO. A-56. HOWEVER, $44, PRESENTED AS A "SURTAX CHARGE" MAY NOT BE ALLOWED ON THE PRESENT RECORD. THE ITEM MUST BE FURTHER CLARIFIED.

TO MRS. DOLORES T. HODGES:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 1, 1971, WITH ENCLOSURES, REQUESTING AN ADVANCE DECISION ON THE RECLAIM VOUCHER OF MR. JERRY M. BENNETT REPRESENTING CERTAIN LEGAL FEES AND A "SURTAX CHARGE" INCIDENT TO THE PURCHASE OF A RESIDENCE AT HIS NEW DUTY STATION.

THE RECLAIM PRESENTS TWO ITEMS OF EXPENSE WHICH WERE DISALLOWED ON THE ORIGINAL VOUCHER. ITEM (1) IS IN THE AMOUNT OF $217.50 FOR LEGAL FEES PAID TO ATTORNEYS REPRESENTING THE MORTGAGEE FOR PREPARATION OF THE REQUIRED MORTGAGE DOCUMENTS. THIS DESCRIPTION OF THE FEE IS STATED IN A LETTER OF RECORD FROM THE MORTGAGE LOAN DEPARTMENT OF UNIVERSITY FEDERAL SAVINGS AND LOAN ASSOCIATION (MORTGAGEE). YOU STATE THAT THIS AMOUNT WAS FORMALLY REPORTED TO THE EMPLOYEE AS PART OF THE PREPAID FINANCE CHARGE IN CONNECTION WITH A REAL ESTATE PURCHASE. THE FORMAL NOTICE GIVEN TO THE EMPLOYEE WAS APPARENTLY A TYPE OF TRUTH-IN-LENDING STATEMENT AS REQUIRED BY THE TRUTH IN LENDING ACT, PUBLIC LAW 90-321. EVEN THOUGH THE TRUTH-IN- LENDING STATEMENT MAY HAVE REPORTED ITEM (1) AS A PREPAID FINANCE CHARGE IT DOES NOT FOLLOW THAT SUCH ITEM WAS IN TRUTH IN LENDING ACT, CODIFIED AT 15 U.S.C. 1605(E), PROVIDES GENERALLY THAT FINANCE CHARGES SHALL NOT INCLUDE "FEES FOR THE PREPARATION OF A DEED, SETTLEMENT STATEMENT, OR OTHER DOCUMENTS." SEE ALSO THE IMPLEMENTING REGULATION "Z" FOUND IN 12 CFR 226.4. ITEM (1) WOULD THEREFORE BE FOR CONSIDERATION UNDER SECTION 4.2C OF OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-56, REVISED JUNE 26, 1969. THAT PROVISION ALLOWS REIMBURSEMENT OF LEGAL COSTS FOR "PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS;" TO THE EXTENT THEY ARE "CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION" AND DO NOT EXCEED "AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY OF THE RESIDENCE." THE CONTROLLING REGULATION DOES NOT REQUIRE THAT THE ABOVE LEGAL COSTS BE INCURRED AS A RESULT OF THE EMPLOYEE RETAINING HIS OWN ATTORNEY RATHER THAN RELYING ON THE MORTGAGEE'S ATTORNEY. CONSEQUENTLY, THE AMOUNT OF $217.50 WOULD BE FOR ALLOWANCE IF OTHERWISE PROPER.

ITEM (2) IN THE AMOUNT OF $44 IS PRESENTED AS A "SURTAX CHARGE" LEVIED BY THE STATE OF FLORIDA AS "A REQUIRED CHARGE FOR MORTGAGES." THE RECORD IS UNCLEAR AS TO WHETHER THIS IS IN THE NATURE OF A MORTGAGE OR TRANSFER TAX OR IS A SURTAX BASED ON THE FLORIDA INTANGIBLE PERSONAL PROPERTY TAX FOR WHICH REIMBURSEMENT HAS BEEN DISALLOWED IN PREVIOUS DECISIONS OF OUR OFFICE. SEE B-171830, MARCH 1, 1971, AND B-160040, FEBRUARY 5, 1968, COPIES ENCLOSED. CONSEQUENTLY, THIS AMOUNT IS NOT REIMBURSABLE ON THE PRESENT RECORD.

OUR REVIEW OF THE SUBJECT VOUCHER HAS DISCLOSED THAT THE EMPLOYEE WAS IMPROPERLY ALLOWED THE AMOUNT OF $58 FOR "INTANGIBLE TAX" AS DESCRIBED ABOVE. THAT AMOUNT SHOULD BE DEDUCTED FROM THE AMOUNT REIMBURSABLE UNDER ITEM (1).

ACCORDINGLY, IF OTHERWISE PROPER, THE CLAIM IS PAYABLE IN THE AMOUNT OF $159.50 ($217.50 MINUS $58). THE RECLAIM VOUCHER WITH ENCLOSURES IS RETURNED HEREWITH.