IRS CLARIFIES THAT MILITARY MOVING ALLOWANCES ARE STILL EXCLUDABLE.

Notice 94-59

The Omnibus Budget Reconciliation Act of 1993 amended section 217 of the Internal Revenue Code to limit the definition of deductible moving expenses. See Section 13213(a)(1) of the Act. As a result of this amendment, questions have arisen concerning the federal income tax treatment of certain temporary lodging, dislocation, and moving-in allowances provided by the Department of Defense in connection with transfers of military personnel to a new permanent duty station.

The Internal Revenue Service intends to issue guidance to clarify that these allowances continue to be excludible from gross income under Treas. Reg. section 1.61-2(b) (relating to subsistence and quarters provided to members of the Armed Forces), section 217(g) (relating to moving and storage expenses of members of the Armed Forces), and section 132(g) (relating to qualified moving expense reimbursements). This guidance will also confirm that no deduction is allowed for any expenses incurred in connection with a transfer of military personnel to a new permanent duty station to the extent the expenses are reimbursed by an excludible allowance.

The principal author of the this notice is David Pardys of the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this notice contact David Pardys on (202) 622-4606 (not a toll-free call).