Armed Forces Tax Council Suggests 'Clarifying Corrections' To Proposed Regs On Moving Expenses.

Thomas G. Abbey of the Armed Forces Tax Council, Washington, has suggested clarifying changes to the proposed regs concerning allowances received by members of the armed forces in connection with moves to new permanent duty stations. His recommendations include changes to the explanations of the temporary lodging expense (TLE) allowance and the temporary lodging allowance (TLA) that, he says, will make the descriptions of the TLE and TLA consistent with their statutory descriptions in, respectively, 37 U.S.C. sections 404a and 405.

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May 10, 1995

CC:DOM:CORP:T:R(IA-5000-94)

Dear Ms. Brookens:

The comments below are offered for your consideration as clarifying corrections to the proposed and temporary regulations released on December 20, 1994, concerning allowances received by members of the armed forces in connection with moves to new permanent duty stations.

In the explanation of the temporary lodging expense (TLE) allowance, it is stated that this allowance is "intended to partially offset the added living expenses of temporary lodging (up to 10 days) within the United States." I suggest that you add the following parenthetical qualification after "United States": (other than Hawaii or Alaska). For these states, the temporary lodging allowance (TLA) is authorized. By modifying the sentence as suggested, the description would be consistent with the statutory description of TLE contained in 37 U.S.C. 404a.

Similarly, the explanation of TLA, as presently stated, refers to expenses "outside the United States." Suggest that you add after "United States" the following: "or in Hawaii or Alaska." This amendment would conform with the statutory description in 37 U.S.C. 405.

In the proposed 1.61-22T, the last sentence reads as follows: "No deduction is allowed under this chapter for any expenses reimbursed by such excludable allowances." For internal consistency, the word "excludable" should be changed to "excluded." This change clarifies that that such allowances are excluded and need not be reported, and that the exclusion does not depend on whether the allowance is expended for deductible expenses. Rather, a deduction would be allowed only for expenses for which the described allowances provide reimbursement if deductible expenses exceed the reimbursement.

Finally, Treasury regulation 1.61-2(b)(3) states the following:

The per diem allowance in lieu of subsistence and the mileage allowance received by members of the Armed Forces, National Oceanic and Atmospheric Administration, and the Public Health Service, while in a travel status or on temporary duty away from their permanent stations shall be included in their gross income.

Recommend that the sentence be changed to read as follows:

The per diem or actual expense allowance, the monetary allowance in lieu of transportation, and the mileage allowance authorized by 37 U.S.C. 404, received by members of the Armed Forces, National Oceanic and Atmospheric Administration, and the Public Health Service, while in a travel status, including travel on permanent change of station orders, or on temporary duty away from then permanent stations, shall be included in gross income except to the extent permitted under accountable plan provisions of 1.162-2.

The revised provision uses current descriptions of such allowances. It would preserve the present practice of not reporting such allowances. An excerpt from the Military Compensation Background Papers (4th ed., 1991) describing travel and transportation allowances is enclosed. If you have questions or comments, please contact me at (703) 693-1066.

Sincerely,

THOMAS G. ABBEY

Enclosure: As stated