Federal Travel Regulation; Income Tax Reimbursement Allowance (ITRA)

GENERAL SERVICES ADMINISTRATION

41 CFR Part 301-11

[FTR Interim Rule 7]

RIN 3090-AG99

Federal Travel Regulation; Income Tax Reimbursement Allowance

(ITRA)

AGENCY: Office of Governmentwide Policy, GSA.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: The General Services Administration (GSA) is amending the

Federal Travel Regulation (FTR) to add authority to implement sections

of the Travel and Transportation Reform Act of 1998, which authorize

Federal agencies to reimburse Federal, State and local income taxes

incurred as a result of long term official travel. It also allows for

the reimbursement of penalty and

[[Page 32813]]

interest payments due to incorrect withholdings by the employee's

agency for tax years 1993 and 1994.

DATES: Effective Date: This interim rule is effective January 1, 1993

and applies to all employees on a long term temporary duty assignment

who incurred income taxes on money received for travel expenses.

Comment Date: Comments must be received by August 17, 1999.

ADDRESSES: Written comments should be sent to Ms. Sharon Kiser,

Regulatory Secretariat (MVR), Office of Governmentwide Policy, General

Services Administration, 1800 F Street, NW, Washington, DC 20405. E-

mail comments may be sent to RIN.3090-AG[email protected].

FOR FURTHER INFORMATION CONTACT: Jim Harte, Travel Team Leader, Travel

and Transportation Management Policy Division (MTT), telephone 202-501-

0483.

SUPPLEMENTARY INFORMATION:

A. Background

In 1992, the Congress eliminated the travel expense deduction for

travel assignments lasting more than one year, which caused travel

expense reimbursements to become taxable income. On October 19, 1998,

the President signed into law the Travel and Transportation Reform Act

of 1998 (the Act) (Pub. L. 105-264). This interim rule implements the

provisions of the Act authorizing the reimbursement of taxes incurred

due to a temporary duty travel assignment.

B. Executive Order 12866

GSA has determined that this interim rule is not a significant

regulatory action for the purposes of Executive Order 12866 of

September 30, 1993.

C. Regulatory Flexibility Act

This interim rule is not required to be published in the Federal

Register for notice and comment; therefore, the Regulatory Flexibility

Act does not apply.

D. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the interim rule

does not impose recordkeeping or information collection requirements,

or the collection of information from offerors, contractors, or members

of the public which require the approval of the Office of Management

and Budget under 44 U.S.C. 501 et seq.

E. Small Business Regulatory Enforcement Fairness Act

This interim rule is also exempt from congressional review

prescribed under 5 U.S.C. 801 since it relates solely to agency

management and personnel.

List of Subjects in 41 CFR part 301-11

Government employees, Travel and transportation expenses.

For the reasons set forth in the preamble, 41 CFR part 301-11 is

amended to read as follows:

PART 301-11--PER DIEM EXPENSES

1. The authority citation for part 301-11 is revised to read as

follows:

Authority: 5 U.S.C. 5707.

2. Part 301-11 is amended by adding Subparts E and F to read as

follows:

Subpart E--Income Tax Reimbursement Allowance (ITRA), Tax Years 1993

and 1994

General

Sec.

301-11.501 What is the Income Tax Reimbursement Allowance (ITRA)?

301-11.502 Who is eligible to receive the ITRA?

301-11.503 Are Federal Insurance Contribution Act (FICA) and

Medicare deductions included in any reimbursement under this part?

Employee Responsibilities

301-11.521 Must I file a claim to be reimbursed for the additional

income taxes incurred?

301-11.522 If I was assessed an income tax penalty and/or interest

payment due to incorrect income tax withholdings, are those payments

reimbursable?

301-11.523 What documentation must I submit to substantiate my

claim?

301-11.524 What steps must my agency take to determine my ITRA?

301-11.525 Is the ITRA I receive taxable income?

301-11.526 May I receive a lump sum payment of the additional tax

liability on the covered ITRA in lieu of submitting another claim?

301-11.527 If I elect a lump sum payment, how is the ITRA paid?

301-11.528 If I do not elect lump sum payment is there any

additional reimbursement?

Agency Responsibilities

301-11.531 What documentation must the employee submit to

substantiate a claim?

301-11.532 How should we compute the employee's ITRA?

301-11.533 Are tax penalty and interest payments reimbursable?

301-11.534 What tax tables should we use to calculate the amount of

allowable reimbursement?

301-11.535 How should we calculate the ITRA?

301-11.536 Is the ITRA reimbursement considered to be income to the

employee?

301-11.537 Are income taxes to be withheld from the ITRA?

301-11.538 May we offer a lump sum payment to cover the income tax

liability on the covered ITRA?

301-11.539 If the employee does not elect a lump sum payment, how

is the tax on the ITRA calculated?

301-11.540 How do we handle any excess payment?

General

Sec. 301-11.501 What is the Income Tax Reimbursement Allowance (ITRA)?

The ITRA is an allowance designed to reimburse Federal, State and

local income taxes incurred incident to an extended TDY assignment at

one location.

Sec. 301-11.502 Who is eligible to receive the ITRA?

An employee (and spouse, if filing jointly) who was in a TDY status

for an extended period at one location, and who incurred Federal,

State, or local income taxes on amounts received as reimbursement for

official travel expenses.

Sec. 301-11.503 Are Federal Insurance Contribution Act (FICA) and

Medicare deductions included in any reimbursement under this part?

No. Reimbursement is limited to income taxes.

Employee Responsibilities

Sec. 301-11.521 Must I file a claim to be reimbursed for the

additional income taxes incurred?

Yes. A claim must be submitted in accordance with your agency's

policy.

Sec. 301-11.522 If I was assessed an income tax penalty and/or

interest payment due to incorrect income tax withholdings, are those

payments reimbursable?

Yes, for the total amount of the income tax penalty and/or interest

assessed by the IRS for tax years 1993 and 1994 only.

Sec. 301-11.523 What documentation must I submit to substantiate my

claim?

Your agency will determine what documentation is sufficient. (See

Sec. 301-11.531.)

Sec. 301-11.524 What steps must my agency take to determine my ITRA?

Your agency should:

(a) Determine Federal, State and local marginal tax rates by using

the procedures and the marginal tax tables established for the

relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8, and

Appendices A, B, C and D to part 302-11 of this title; or

(b) Determine reimbursement as calculated in the illustration shown

in Sec. 301-11.535.

[[Page 32814]]

Sec. 301-11.525 Is the ITRA I receive taxable income?

Yes. The amount received must be reported as taxable income in the

year in which received, but you are eligible to receive an allowance to

cover the taxes assessed on the ITRA under Sec. 301-11.528.

Sec. 301-11.526 May I receive a lump sum payment of the additional tax

liability on the covered ITRA in lieu of submitting another claim?

Yes, if agreed to in writing by your agency and with the

understanding that you will be responsible for any income taxes due

without further reimbursement.

Sec. 301-11.527 If I elect a lump sum payment, how is the ITRA paid?

(a) Reimbursement is as illustrated:

Lump Sum ITRA Tax Paid to Employee

------------------------------------------------------------------------

------------------------------------------------------------------------

ITRA reimbursement for tax year 1993.......................... $14,435

Federal Tax liability on ITRA Reimbursement (@ 28%)........... 4,042

VA State tax liability (@ 5.75%).............................. 830

Local tax liability........................................... 0

---------

Total reimbursement......................................... 19,307

------------------------------------------------------------------------

(b) Reimbursement of the ITRA and the tax on the ITRA is a final

lump sum payment with no further reimbursement. You will be responsible

for any income taxes due on $19,307.

Sec. 301-11.528 If I do not elect lump sum payment is there any

additional reimbursement?

Yes. You are reimbursed for the tax on the tax reimbursement

received. Your agency will calculate the tax on the tax reimbursement

using the formulas developed for the Year 2 reimbursements of the

relocation income tax allowance (see Sec. 302-11.8 of this title).

Agency Responsibilities

Sec. 301-11.531 What documentation must the employee submit to

substantiate a claim?

You must determine what documentation you require to be submitted

with the employee's claim. It can include:

(a) A certified statement as prescribed in Sec. 302-11.10 of this

title or copies of completed Federal, State and local tax return for

the tax year in which the taxes were withheld and paid.

(b) Copies of W-2's and Form 1099's.

(c) Any documentation received from the IRS identifying any

interest or penalty payment (tax years 1993 and 1994 only).

(d) Any other documentation necessary to substantiate the claim.

Sec. 301-11.532 How should we compute the employee's ITRA?

You should follow the procedures prescribed for the relocation

income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices

A, B, C, and D to part 302-11 of this title or as illustrated in

Sec. 301-11.535.

Sec. 301-11.533 Are tax penalty and interest payments reimbursable?

Yes, the total amount of any penalty and interest assessed by the

IRS (for tax years 1993 and 1994 only) due to the failure of the

Government to withhold the appropriate income taxes are reimbursable.

Sec. 301-11.534 What tax tables should we use to calculate the amount

of allowable reimbursement?

The tax tables for the year the tax was incurred are to be used.

Sec. 301-11.535 How should we calculate the ITRA?

(a) Use the documents prescribed in Sec. 301-11.531 to calculate

the ITRA as follows:

(1) Determine Federal, State and local marginal tax rates by using

the procedures and the marginal tax tables established for the

relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and

Appendices A, B, C and D to part 302-11 of this title; and

(2) Add any penalty or interest for tax years 1993 or 1994 only to

determine the full ITRA payment; or

(b) As calculated in the following illustration.

Example of calculating an employee's tax return using the

marginal tax rate schedules in Appendix B to part 302-11 of this

title:

For Tax Years 1993 or 1994 (Married Filing Joint Return)

------------------------------------------------------------------------

Original Recalculated

------------------------------------------------------------------------

1. Adjusted Gross Income (w/ travel $75,246 $75,246

reimbursement).........................

2. Subtract travel reimbursement........ .............. (15,482)

3. Subtract personal exemptions and (12,689) (12,689)

itemized or standard deductions........

4. Adjusted taxable Income.............. 62,557 47,075

5. Tax liability on adjusted taxable

income:

a. Federal.......................... 17,516 $7,061*

(28%) (15%)

b. State, VA (5.75% tax bracket).... 3,597 2,707

c. Local: Not applicable............ 0 0

-------------------------------

d. Total............................ 21,113 9,768

6. Difference of total of column 1 minus

total of column 2:

Additional Taxes Incurred due to

travel reimbursement--$11,345

7. Add to the tax difference:

a. Penalty Payment imposed by IRS

tax year 1993--1,500

b. Interest Payment imposed by IRS

tax year 1993--1,500

Total 6 and 7a and b = ITRA--$14,345**

------------------------------------------------------------------------

* Adjusted taxable income places employee in lower tax bracket.

** The ITRA reimbursement is taxable income for the year in which paid

at the appropriate Federal, State and local income tax rates.

Sec. 301-11.536 Is the ITRA reimbursement considered to be income to

the employee?

Yes. The ITRA reimbursement is considered taxable income in the

year paid and is subject to tax withholding as any other income.

Sec. 301-11.537 Are income taxes to be withheld from the ITRA?

Yes, as determined by your internal tax withholding procedures

established for your agency pursuant to IRS procedures.

Sec. 301-11.538 May we offer a lump sum payment to cover the income

tax liability on the covered ITRA?

Yes, if the employee mutually agrees in writing to the lump sum

payment and understands that he/she is responsible

[[Page 32815]]

for any income taxes without further reimbursement. (See the

illustration in Sec. 301-11.527.)

Sec. 301-11.539 If the employee does not elect a lump sum payment, how

is the tax on the ITRA calculated?

The tax on the ITRA reimbursement should be calculated using the

Year 2 formulas developed for the relocation income tax allowance. (See

Sec. 302-11.8.)

Sec. 301-11.540 How do we handle any excess payment?

You must collect any excess payments, which includes issuing

corrected W-2's or 1099's.

Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years 1995

and Thereafter

General

Sec.

301-11.601 What is the Income Tax Reimbursement Allowance (ITRA)?

301-11.602 Who is eligible to receive the ITRA?

301-11.603 Are Federal Insurance Contribution Act (FICA) and

Medicare deductions included in any reimbursement under this part?

Employee Responsibilities

301-11.621 Must I file a claim to be reimbursed for the additional

income taxes incurred?

301-11.622 If I was assessed an income tax penalty and/or interest

payment due to incorrect income tax withholdings, are those payments

reimbursable?

301-11.623 What documentation must I submit to substantiate my

claim?

301-11.624 What steps must my agency take to determine my ITRA?

301-11.625 Is the ITRA I receive taxable income?

301-11.626 May I receive a lump sum payment of the additional tax

liability on the covered ITRA in lieu of submitting another claim?

301-11.627 If I elect a lump sum payment, how is the ITRA paid?

301-11.628 If I do not elect lump sum payment is there any

additional reimbursement?

Agency Responsibilities

301-11.631 What documentation must the employee submit to

substantiate a claim?

301-11.632 How should we compute the employee's ITRA?

301-11.633 Are tax penalty and interest payments reimbursable?

301-11.634 What tax tables should we use to calculate the amount of

allowable reimbursement?

301-11.635 How should we calculate the ITRA?

301-11.636 Is the ITRA reimbursement considered to be income to the

employee?

301-11.637 Are income taxes to be withheld from the ITRA?

301-11.638 May we offer a lump sum payment to cover the income tax

liability on the covered ITRA?

301-11.639 If the employee does not elect a lump sum payment, how

is the tax on the ITRA reimbursement calculated?

301-11.640 How do we handle any excess payment?

Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years

1995 and Thereafter

General

Sec. 301-11.601 What is the Income Tax Reimbursement Allowance (ITRA)?

The ITRA is an allowance designed to reimburse Federal, State and

local income taxes incurred incident to an extended TDY assignment at

one location.

Sec. 301-11.602 Who is eligible to receive the ITRA?

An employee (and spouse, if filing jointly) who was in a TDY status

for an extended period at one location and who incurred Federal, State,

or local income taxes on amounts received as reimbursement for official

travel expenses.

Sec. 301-11.603 Are Federal Insurance Contribution Act (FICA) and

Medicare deductions included in any reimbursement under this part?

No. Reimbursement is limited to income taxes.

Employee Responsibilities

Sec. 301-11.621 Must I file a claim to be reimbursed for the

additional income taxes incurred?

Yes, a claim must be submitted in accordance with your agency's

policy.

Sec. 301-11.622 If I was assessed an income tax penalty and/or

interest payment due to incorrect income tax withholdings, are those

payments reimbursable?

No. The reimbursement of tax penalty and/or interest payment

assessed by the IRS is limited by law to tax years 1993 and 1994 only.

Sec. 301-11.623 What documentation must I submit to substantiate my

claim?

Your agency will determine what documentation is sufficient. (See

Sec. 301-11.631.)

Sec. 301-11.624 What steps must my agency take to determine my ITRA?

Your agency should:

(a) Determine Federal, State and local marginal tax rates by using

the procedures and the marginal tax tables established for the

relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and

Appendices A, B, C and D to part 302-11 of this title; or

(b) Determine reimbursement as calculated in the illustration shown

in Sec. 301-11.535.

Sec. 301-11.625 Is the ITRA I receive taxable income?

Yes. The amount received must be reported as taxable income in the

year in which received, but you are eligible to receive an allowance to

cover the taxes assessed on the ITRA under Sec. 301-11.628.

Sec. 301-11.626 May I receive a lump sum payment of the additional tax

liability on the covered ITRA in lieu of submitting another claim?

Yes, if agreed to in writing by your agency and with the

understanding that you will be responsible for any income taxes due

without further reimbursement.

Sec. 301-11.627 If I elect a lump sum payment, how is the ITRA paid?

(a) Reimbursement is as illustrated:

Lump Sum ITRA Tax Paid to Employee

------------------------------------------------------------------------

------------------------------------------------------------------------

ITRA reimbursement for tax year 1995.......................... $14,435

Federal Tax liability on ITRA Reimbursement (@ 28%)........... 4,042

VA State tax liability (@ 5.75%).............................. 830

Local tax liability........................................... 0

---------

Total reimbursement......................................... 19,307

------------------------------------------------------------------------

(b) Reimbursement of the ITRA and tax on the ITRA is a final lump

sum payment with no further reimbursement. You will be responsible for

any income taxes due on $19,307.

Sec. 301-11.628 If I do not elect lump sum payment is there any

additional reimbursement?

Yes. You are reimbursed for the tax on the tax reimbursement

received. Your agency will calculate the tax on the tax reimbursement

using the formulas developed for the Year 2 reimbursements of the

relocation income tax allowance (see Sec. 302-11.8 of this title).

Agency Responsibilities

Sec. 301-11.631 What documentation must the employee submit to

substantiate a claim?

You must determine what documentation you require to be submitted

with the employee's claim. It may include:

(a) A certified statement as prescribed in Sec. 302-11.10 of this

title or a copy of the employee's completed Federal, State and local

tax return for the tax year in which the taxes were withheld and paid.

[[Page 32816]]

(b) Copies of W-2's and Form 1099's; and

(c) Any other documentation necessary to substantiate your claim.

Sec. 301-11.632 How should we compute the employee's ITRA?

You should follow the procedures prescribed for the relocation

income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices

A, B, C, and D to part 302-11 of this title or as illustrated in

Sec. 301-11.535.

Sec. 301-11.633 Are tax penalty and interest payments reimbursable?

No. The reimbursement of penalty and/or interest payments assessed

by the IRS is limited by law to tax years 1993 and 1994 only.

Sec. 301-11.634 What tax tables should we use to calculate the amount

of allowable reimbursement?

The tax tables for the year the tax was incurred are to be used.

Sec. 301-11.635 How should we calculate the ITRA?

Use the documents prescribed in Sec. 301-11.631 to calculate the

ITRA as follows:

(a) Determine Federal, State and local marginal tax rates by using

the procedures and the marginal tax tables established for the

relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and

Appendices A, B, C and D to part 302-11 of this title, or

(b) As calculated in the following illustration.

Example of calculating an employee's tax return using the

marginal tax rate schedules in Appendix B to part 302-11 of this

title:

For Tax Year 1995 and Thereafter

[Married Filing Joint Return]

------------------------------------------------------------------------

Original Recalculated

------------------------------------------------------------------------

1. Adjusted Gross Income (w/ travel $75,246 $75,246

reimbursement):........................

2. Subtract travel reimbursement:....... .............. (15,482)

3. Subtract personal exemptions and (12,689) (12,689)

itemized or standard deductions........

4. Adjusted taxable income.............. 62,557 47,075

5. Tax liability on adjusted taxable

income:

a. Federal (28%).................... 17,516 *7,061

(15%)

b. State, VA (5.75% tax bracket).... 3,597 2,707

c. Local: Not applicable............ 0 0

-------------------------------

d. Total............................ 21,113 9,768

6. Difference of total of column 1 minus

total of column 2: Additional Taxes

Incurred due to travel reimbursement--

$11,345

Total = ITRA--$11,345**

------------------------------------------------------------------------

*Adjusted taxable income places employee in lower tax bracket.

**The ITRA reimbursement is taxable income for the year in which paid at

the appropriate Federal, State and local income tax rates.

Sec. 301-11.636 Is the ITRA reimbursement considered to be income to

the employee?

Yes. The ITRA reimbursement is considered taxable income in the

year paid and is subject to tax withholding as any other income.

Sec. 301-11.637 Are income taxes to be withheld from the ITRA?

Yes, as determined by your internal tax withholding procedures

established for your agency pursuant to IRS procedures.

Sec. 301-11.638 May we offer a lump sum payment to cover the income

tax liability on the covered ITRA?

Yes, if the employee mutually agrees in writing to the lump sum

payment and understands that he/she is responsible for any income taxes

without further reimbursement. See the illustration in Sec. 301-11.627.

Sec. 301-11.639 If the employee does not elect a lump sum payment, how

is the tax on the ITRA reimbursement calculated?

The tax on the tax reimbursement should be calculated using the

Year 2 formulas developed for the relocation income tax allowance. (See

Sec. 302-11.8.)

Sec. 301-11.640 How do we handle any excess payment?

You must collect any excess payments, which includes issuing

corrected W-2's or 1099's.

Dated: June 10, 1999.

David J. Barram,

Administrator of General Services.

[FR Doc. 99-15540 Filed 6-17-99; 8:45 am]

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