B-245171, Mar 10, 1992
B-245171: Mar 10, 1992
He also was required to pay $400 at signing as a nonrefundable deposit in exchange for the lessor agreeing to hold the residence for him. His claim that the $400 was a prepaid part of his rent under section 302 5.4(a) of the Federal Travel Regulation is denied. Who is a federal income tax nonitemizer. Questions the fact that he was required to pay a much greater income tax without reimbursement under Part 302-11 of the Federal Travel Regulation (FTR). Because he was unable to deduct any of his moving expenses. This is due to implementation of the Tax Reform Act of 1986. Eddy - Temporary Quarters Subsistence Expenses - Nonrefundable Deposit - RIT: This decision is in response to correspondence from Mr.
B-245171, Mar 10, 1992
DIGEST: 1. A transferring employee signed an agreement to lease quarters at his new duty station for temporary quarters occupancy at a specific future date at a rental of $1,100 a month payable upon occupancy. He also was required to pay $400 at signing as a nonrefundable deposit in exchange for the lessor agreeing to hold the residence for him. His claim that the $400 was a prepaid part of his rent under section 302 5.4(a) of the Federal Travel Regulation is denied. The $400 deposit to hold the residence may be reimbursed as a miscellaneous expense under FTR Sec. 302- 3.1, but, under the lease, may not be reimbursed as a lodging cost under FTR Sec. 302-5.4(a). 2. A transferred employee, who is a federal income tax nonitemizer, questions the fact that he was required to pay a much greater income tax without reimbursement under Part 302-11 of the Federal Travel Regulation (FTR), governing the Relocation Income Tax (RIT) Allowance, because he was unable to deduct any of his moving expenses. This is due to implementation of the Tax Reform Act of 1986, which requires that these expenses may only be treated as an itemized deduction on Schedule A of the Form 1040 income tax return. This Office has no authority to grant relief to employees who do not itemize their deductions, since regulatory authority under 5 U.S.C. Sec. 5724b (1988) has been delegated to the General Services Administration.
John W. Eddy - Temporary Quarters Subsistence Expenses - Nonrefundable Deposit - RIT:
This decision is in response to correspondence from Mr. John W. Eddy, appealing our Claims Group settlement Z-2867108, June 17, 1991. For the following reasons, we sustain our Claims Group settlement.
Mr. Eddy, an employee of the Internal Revenue Service, Department of the Treasury, was transferred to Panama City, Florida, with a reporting date of February 25, 1990. On February 3, 1990, prior to reporting for duty, he signed an agreement to lease a furnished single family residence at his new duty station commencing February 25, 1990, at a rent of $1,100, payable on February 25. As part of that agreement, he was separately required to pay $400 as a nonrefundable deposit to the lessor in exchange for the lessor's promise to hold the residence for him until February 25.
Mr. Eddy filed a travel voucher claiming that the $400 deposit was part of the rent for the month and sought reimbursement for $1,500 as the lodging portion of his temporary quarters subsistence expense claim. His agency disallowed his claim, limiting his lodging reimbursement to the $1,100.
Mr. Eddy appealed that action and the agency submitted the matter to our Claims Group, suggesting that the $400 expense might be reimbursed as a miscellaneous expense allowance item under section 302-3.1 of the Federal Travel Regulation (FTR). /1/ By settlement of June 17, 1991, our Claims Group agreed, but pointed out that, since Mr. Eddy had already received $700 under those provisions, he was not entitled to an additional amount unless his documented expenses exceeded $700.
Mr. Eddy seeks further consideration of his claim, but not as a miscellaneous expense. He contends that the $400 payment on February 3 was a prepaid portion of his rent for his period of temporary quarters occupancy. He has supplied a statement from the lessor dated December 18, 1990, purporting to show that the actual rent charged him for the lease period was $1,500.
Mr. Eddy also questions the correctness of the method used to compute his Relocation Income Tax (RIT) Allowance. He contends that because he has been a nonitemizer for federal income tax purposes, he was unable to deduct any of his moving expenses incident to his 1990 transfer. This caused him to have to pay a significant amount of additional federal income taxes without any reimbursement by the government, even though the law governing the RIT Allowance states as its purpose that employees are to be reimbursed for substantially all additional income taxes required to be paid incident to that transfer.
Under the provisions of section 302-5.4(a) of the FTR, /2/ only actual and reasonable subsistence expenses which are incurred incident to temporary quarters occupancy may be reimbursed. Thus, the question is whether the $400 payment made by Mr. Eddy on February 3, 1990, qualifies as part of the cost of lodging under section 302-5.4(a), supra.
The statement from the lessor dated December 18, 1990, asserts that the rent charged for the month was $1,500. However, that statement identifies the $400 amount as a "guarantee" that he would occupy the residence on February 25, 1990. Moreover, the agreement executed on February 3 specifically provides that the rent due and payable for the 1-month period beginning February 25, 1990, shall be $1,100 and separately identifies the $400 payment as a "nonrefundable deposit... for the purpose of holding the home for Resident during the period between February 3 and February 25, 1990." The agreement concludes by stipulating that "[t!his document represents the entire agreement between Resident and Owner."
Under the terms of the agreement, the $400 payment was a nonrefundable deposit. It was made in exchange for the lessor's agreement that the residence would be held for Mr. Eddy until February 25, and to serve as compensation for the lessor in the event Mr. Eddy failed to occupy the residence on that date. Thus, while the $400 was an integral part of the consideration paid incident to executing the rental agreement, it was not part of the rent to be paid upon occupancy of the residence for the lease period. Accordingly, the $400 payment may not be reimbursed under FTR Sec. 302-5.4(a) as a lodging cost for temporary quarters occupancy. David E. Nowak, 65 Comp.Gen. 805 (1986)] 55 Comp.Gen. 779, 782 (1976).
The second issue raised by Mr. Eddy concerns the Relocation Income Tax (RIT) Allowance (5 U.S.C. Sec. 5724b (1988)) which was enacted into law on November 14, 1983, by Pub.L. No. 98-151, 97 Stat. 978, and amended by Title I, Pub.L. No. 98-473, October 12, 1984, 98 Stat. 1969. Prior to implementation of the Tax Reform Act of 1986, an employee transferred in the interest of the government was able to claim virtually all of his or her relocation expenses under those provisions upon filing the Form 1040 tax return since those expenses were treated as an adjustment to gross income. Following implementation of the Tax Reform Act, the reporting of these expenses was moved to Schedule A of the Form 1040 tax return. However, the current tax law does not permit combining the otherwise allowable moving expense deduction with the standard deduction.
The computation formulas governing the RIT Allowance contained in Part 302-11 of the FTR, /3/ were devised by the General Services Administration (GSA) in conjunction with the Internal Revenue Service. Under section 302 -11.8(c)(1), the amount of the covered reimbursements will be determined as if the employee had itemized and deducted all allowable moving expense deductions. This is based on the assumption that employees will receive the benefit of allowable moving expense deductions to offset income, either by itemizing or through the increased standard deduction. C.F.R. Sec. 302-11.8(b)(1)(ii). We have no basis to question the computation formula devised by GSA and IRS, nor do we have any authority to amend or modify the provisions of the FTR to grant relief to individuals who do not itemize their deductions, since the regulatory authority under 5 U.S.C. Sec. 5724b has been delegated to the GSA.
/1/ 41 C.F.R. Sec. 302-3.1 (1991).
/2/ 41 C.F.R. Sec. 302-5.4(a) (1991).
/3/ 41 C.F.R. Part 302-11 (1991).