|CHAPTER��16�-�RELOCATION�INCOME�TAX�(RIT)�ALLOWANCE
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| | CHAPTER� 16 - RELOCATION INCOME TAX (RIT) ALLOWANCE | 
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| | C16001� AUTHORITY | 
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| | Payment of a relocation income tax (RIT) allowance is authorized to reimburse eligible transferred employees for substantially all of the additional Federal, State, and local income taxes incurred by the employee, or by the employee and spouse if a joint tax return is filed, as a result of certain travel and transportation expenses and relocation allowances which are furnished in kind, or for which reimbursement or an allowance is provided by the Government (5 U.S.C. 5724b, as amended).� Payment of the RIT allowance also is authorized for income taxes paid to the Commonwealths of Puerto Rico, and the Northern Mariana Islands, and the U.S. possessions in accordance with a decision of the Comptroller General of the United States (67 Comp. Gen. 135 (1987)).� The RIT allowance shall be calculated and paid as provided in this Chapter. | 
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| | C16002� COVERAGE | 
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| | A.� ELIGIBLE EMPLOYEES.� | 
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| | Payment of a RIT allowance is authorized for employees transferred on or after 14 November 1983, in the interest of the Government from one official station to another for permanent duty.� The effective date of an employee's transfer is the date the employee reports for duty at the new official station. | 
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| | B.� INDIVIDUALS NOT COVERED.� | 
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| | The provisions of this Chapter are not applicable to the following individuals or employees: | 
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| | 1.� new appointees as defined in par.C4050-A, which includes new appointees to Senior Executive Service positions, new Presidential appointees, and new appointees to overseas posts of duty; | 
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| | 2.� employees assigned under the Government Employees Training Act (see par.C4502); or | 
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| | 3.� employees returning from overseas assignments for the purpose of separation. | 
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| | C16003� TYPES OF MOVING EXPENSES OR ALLOWANCES COVERED AND GENERAL LIMITATIONS | 
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| | The RIT allowance is by law limited as to the types of moving expenses that can be covered.� The law authorizes reimbursement of additional income taxes resulting from certain moving expenses furnished in kind or for which reimbursement or an allowance is provided to the transferred employee by the Government.� However, such moving expenses are covered by the RIT allowance only to the extent that they are (1) actually paid or incurred, an (2) are not allowable as a moving expense deduction for tax purposes.� The types of expenses or allowances listed in A through I are covered by the RIT allowance within the limitations discussed. | 
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| | A.� EN ROUTE TRAVEL.� | 
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| | Travel (including per diem) and transportation expenses of the transferred employee and immediate family for en route travel from the old official station to the new official station.� See par.C7006. | 
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| | B.� HOUSEHOLD GOODS (HHG) SHIPMENT.� | 
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| | Transportation (including temporary storage) expenses for movement of household goods (HHG) from the old official station to the new official station.� See Chapter 8. | 
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| | C.� NONTEMPORARY STORAGE EXPENSES.� | 
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| | Allowable expenses for nontemporary storage of HHG belonging to an employee transferred on or after 14 November 1983 through 11 October 1984 to an isolated location in the continental United States (CONUS).� (See par.C8001-B3).� Nontemporary storage expenses are not covered by the RIT allowance for transfers on or after 12 October 1984.� See par.C16004, item 3. | 
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| | D.� MOBILE HOME MOVEMENT.� | 
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| | Expenses for the movement of a mobile home for use as a residence when movement is authorized instead of shipment and temporary storage of HHG.� See Chapter 10. | 
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| | E.� HOUSEHUNTING TRIP.� | 
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| | Travel (including per diem)� and transportation expenses of the employee and spouse for one round trip to the new official station to seek permanent residence quarters.� See par.C4107. | 
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| | F.� TEMPORARY QUARTERS.� | 
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| | Subsistence expenses of the employee and immediate family during occupancy of temporary quarters� SeeChapter 13. | 
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| | G.� REAL ESTATE EXPENSES.� | 
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| | Allowable expenses for the sale of the residence (or expenses of settlement of an unexpired lease) at the old official station and for purchase of a home at the new official station for which reimbursement is received by the employee.� SeeChapter 14. | 
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| | H.� MISCELLANEOUS EXPENSE ALLOWANCE.� | 
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| | A miscellaneous expense allowance for the purpose of defraying certain expenses associated with discontinuing a residence at one location and establishing a residence at the new location in connection with an authorized or approved permanent change of station (PCS).� See Chapter 9. | 
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| | I.� RELOCATION SERVICES.� | 
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| | Payments, or portions thereof, made to a relocation service company for services provided to covered transferred employees.� DOD components shall determine the tax consequences of their relocation services on their covered employees. | 
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| | 1.� For Employees Transferred On or After 14 November 1983 Through 11 October 1984.� The amount of a broker's fee or real estate commission or other real estate sales transaction expenses which normally are reimbursable to the employee under Chapter 14 but have been paid by a relocation service company incident to an assigned sale from the employee, provided that such payments constitute income to the employee.� For the purpose of this regulation, an assigned sale occurs when an employee obtains a binding agreement for the sale of his/her residence and assigns the inherent rights and obligations of that agreement to a relocation company that is providing services under contract with the employing DOD component.� For example, if the employee incurs an obligation to pay a specified broker's fee or real estate commission under the terms of the sales agreement, this obligation along with the same agreement is assigned to the relocation company and may, upon payment of the obligation by the relocation company, constitute income to the employee. | 
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| | 2.� For Employees Transferred On or After 12 October 1984.� Expenses paid by a relocation company providing relocation services to the transferred employee pursuant to a contract with the employing DOD component to the extent such payments constitute income to the employee. | 
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| | NOTE:� See paragraph chapter referenced in pars. A through I for reimbursement provisions for the allowance listed in those paragraphs.� See Section 217 of the Internal Revenue Code (IRC) and Internal Revenue Service (IRS) Publication 521 entitled "Moving Expenses" an appropriate State and local tax authority publications for additional information on the taxability of moving expense reimbursements and the allowable tax deductions for moving expenses. | 
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| | C16004� EXCLUSIONS FROM COVERAGE | 
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| | The provisions of this Chapter are not applicable to the following: | 
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| | 1.� any tax liability that may result from payments by the Government to relocation companies on behalf of employees transferred on or after 14 November 1983 through 11 October 1984, other than the payments for those expense specified in par.C16003-I1; | 
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| | 2.� any tax liability incurred for local income taxes other than city income tax as a result of moving expense reimbursements for employees transferred on or after 14 November 1983 through 11 October 1984.� See definition in par.C16005-B; | 
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| | 3.� any tax liability resulting from reimbursed expenses for any nontemporary storage of HHG except as specifically provided for in par.C16003-C; | 
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| | 4.� any tax liability resulting from paid or reimbursed expenses for shipment of a privately owned automobile; | 
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| | 5.� any tax liability resulting from an excess of reimbursed amounts over the actual expense paid or incurred.� For instance, if an employee's reimbursement for the movement of HHG is based on the commuted rate schedule and his/her actual moving expenses are less than the reimbursement, the tax liability resulting from the difference is not covered by the RIT allowance.� See par.C16008-C2a; | 
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| | 6.� any tax liability resulting from an employee's decision not to deduct moving expenses for which a tax deduction is allowable under the Internal Revenue Code or appropriate State and local tax codes.� See pars.C16008-B1andC16008-C2; | 
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| | 7.� any tax liability resulting from the payment of recruitment, retention, or relocation bonuses authorized by the Office of Personnel Management pursuant to 5 U.S.C. 5753 and 5754, or any other provisions which allow relocation payments that are not reimbursements for travel, transportation, and other expenses incurred in relocation. | 
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| | C16005� DEFINITIONS AND DISCUSSION OF TERMS | 
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| | For purposes of this Part, the following definitions will apply: | 
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| | A.� STATE INCOME TAX.� | 
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| | A tax, imposed by a State tax authority, that is deductible for Federal income tax purposes as a State income tax under section 164(a)(3) of the IRC.� "State" means any one of the several States of the United States and the District of Columbia. | 
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| | B.� LOCAL INCOME TAX.� | 
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| | A tax, imposed by a recognized city or county tax authority that is deductible for Federal income tax purposes as a local (city or county) income tax under section 164(a)(3) of the IRC; except that, for employees transferred on or after 14 November 1983 through 11 October 1984, local income tax shall be construed to mean only city income tax.� For purposes of this regulation: | 
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| | 1.� City.� "City" means any unit of general local government which is classified as a municipality by the Bureau of the Census, or which is a town or township that in the determination of the Secretary of the Treasury possesses powers and performs functions comparable to those associated with municipalities, is closely settled, and contains within its boundaries no incorporate places as defined by the Bureau of the Census (31 CFR 215.2(b)(1)). | 
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| | 2.� County.� "County" means any unit of local general government which is classified as a county by the Bureau of the Census (31 CFR 215.2(e)). | 
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| | C.� COVERED MOVING EXPENSE REIMBURSEMENTS OR COVERED REIMBURSEMENTS.� | 
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| | As used herein, these terms include those moving expenses listed in par. C16003 as being covered by the RIT allowance and which may be furnished in kind, or for which reimbursement or an allowance is provided by the Government. | 
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| | D.� COVERED TAXABLE REIMBURSEMENTS.� | 
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| | Covered moving expense reimbursements minus the tax deductions allowable under the IRC and IRS regulations for moving expenses.� See determination in par.C16008-C. | 
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| | E.� YEAR 1 OR REIMBURSEMENT YEAR.� | 
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| | The calendar year in which reimbursement or payment for moving expenses is made to, or for, the employee under the provisions of this Chapter.� All of part of these reimbursements (see par.C16006) are reported to the IRS as income (wages, salary or other compensation) to the employee for that tax year under the provisions of the IRC and IRS regulations, and are subject to Federal tax withholding.� The withholding tax allowance (WTA) (see subpar. N) is calculated in Year 1, to cover the employee's Federal tax withholding obligations each time covered moving expenses are made that result in a Federal tax withholding obligation.� For purposes of this regulation, an advance of funds for any of the covered moving expenses is not considered to be a reimbursement or a payment until the travel voucher settlement for such expenses takes place.� If an employee's reimbursement for moving expenses is spread over more than 1 year, he/she will have more than one Year 1. | 
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| | F.� YEAR 2.� The calendar year in which a claim for the RIT allowance is paid. | 
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| | 1.� General.� | 
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| | Generally, Year 2 will be the calendar year immediately following Year 1 in which the employee files a tax return reflecting his/her tax liability for income received in Year 1.� However, there may be instances where the employee's claims submission and/or payment of the RIT allowance is delayed beyond the calendar year immediately following Year 1.� (Year 1 will always be the calendar year that reimbursements are received; see subpar. E).� Year 2 will be the calendar year in which the RIT allowance is actually paid. | 
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