Board of Contract Appeals General Services Administration Washington, D.C. 20405 _______________________ January 18, 2000 ______________________ GSBCA 15050-RELO In the Matter of DARRELL E. HUTSON Darrell E. Hutson, Madison, AL, Claimant. Carolyn Asher, Supervisor, Travel Customer Service Team, Defense Finance and Accounting Service, St. Louis, MO, appearing for Department of Defense. HYATT, Board Judge. Claimant, Darrell E. Hutson, is a civilian employee of the Department of Defense (DoD). His permanent duty station, the U.S. Army Aviation and Troop Command (ATCOM) in St. Louis, Missouri, was closed under DoD's base realignment and closure activities. Mr. Hutson accepted a permanent change of station (PCS) from St. Louis to the newly constituted U.S. Army Aviation and Missile Command (AMCOM) in Huntsville, Alabama. He was reimbursed for moving expenses incurred in connection with this transfer, and accordingly realized additional taxable income, which was reported to the Internal Revenue Service. The added income generated by reimbursement of moving expenses was offset by the relocation income tax (RIT) allowance. Mr. Hutson's claim is for reimbursement of the partial loss of eligibility for the Hope Scholarship tax credit. Specifically, he explains that he has a son in college and, beginning in 1998, was eligible for a tax credit to defray educational expenses.[foot #] 1 The amount of the tax credit varies, depending upon the adjusted gross income of the taxpayer. Absent the added amount of income caused by inclusion of reimbursed moving expenses, Mr. Hutson would have received the maximum credit of $1500. As a result of the reimbursed moving ----------- FOOTNOTE BEGINS --------- [foot #] 1 The Hope Scholarship Credit was enacted as part of the Taxpayer Relief Act of 1997, Pub. L. No. 105-34, 111 Stat. 788 (1997). The Act added 25A to the Internal Revenue Code, providing the Hope Scholarship Credit and Lifetime Learning Credit. ----------- FOOTNOTE ENDS ----------- expenses, Mr. Hutson's credit was only $867. He wants to be paid the difference, $633, claiming that since the purpose of the RIT allowance is to avoid an adverse impact on the transferred employee's tax return, some adjustment should be made to offset the impact that reimbursement of moving expenses had on the credit he would have received based on his normal income. The Defense Finance and Accounting Service (DFAS) denied Mr. Hutson's claim, noting that this is not the type of tax impact that can be offset under the RIT allowance or other applicable regulations. Accordingly, DFAS takes the position that it does not have the authority to compensate Mr. Hutson for a tax credit loss. Discussion Claimant's fundamental point is that the purpose of the RIT allowance is to compensate relocated employees for the tax consequences of increased taxable income generated by the reimbursement of various moving expenses. He points out that the increased income realized by the move was temporary in nature and represented amounts over which he had no control -- the money could only be applied to pay for moving expenses. It is unfair, in claimant's view, to deny reimbursement of a portion of a tax credit he would have received if not for the "increased income." DFAS responds that, fair or not, it has no authority to reimburse Mr. Hutson for the reduced tax credit. Agencies are directed by statute to reimburse employees for "substantially all" of the taxes they incur for reimbursed moving expenses. 5 U.S.C. 5724b (1994). This direction does not mean, however, that employees will be reimbursed for every dollar of tax liability attributable to, or incurred as the result of, having received relocation benefits and allowances. Herman S. Ransom, GSBCA 15151-RELO (Dec. 28, 1999); Sol Gilman, GSBCA 14938-RELO, 99-2 BCA 30,506; John F. Stinson, GSBCA 14625-RELO, 99-1 BCA 30,246; William A. Lewis, GSBCA 14367-RELO, 98-1 BCA 29,532. Here, it is undisputed that DFAS calculated the RIT allowance properly in accordance with the procedures prescribed in the Federal Travel Regulation (FTR) and in the Joint Travel Regulations (JTR). The applicable regulations make clear that the RIT allowance procedures are to be applied uniformly and agencies may not make adjustments to accommodate an employee's unique circumstances. 41 CFR 302-11 (1999); JTR C16006-16008. The General Accounting Office (GAO), the Board's predecessor in resolving claims by Federal employees for relocation expenses, addressed a similar claim in Frayne W. Lehman, 69 Comp. Gen. 258 (1990). This claim arose because the transferred employee, due to reimbursement of his relocation expenses, had an adjusted gross income that exceeded the maximum allowable for taking a deduction for a contribution to an Individual Retirement Account (IRA). The loss of the IRA deduction caused him to be out of pocket by some $300, which amount he contended should be reimbursed. GAO observed, in denying this claim: The regulations contain no provisions specifically relating to an IRA deduction the entitlement to which varies among individuals depending on such factors as income level, return-filing status and whether an employee or spouse is under an employer pension program. Neither do the regulations provide for reimbursement based on some secondary effect, such as an increase in the employee's income level which disqualifies him from some other deduction, such as an IRA deduction. In fact, this appears to be the type of "unique" circumstance which the regulations specifically preclude from consideration. Id. at 259-60. GAO's rationale in Lehman is equally applicable to the claim before us now. Mr. Hutson seeks to defray the "secondary effect" on an income tax benefit that is linked to income level. The agency has no authority to increase his RIT allowance to compensate for the partial loss of this credit.[foot #] 2 This claim was properly denied. _________________________________ CATHERINE B. HYATT Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 2 Mr. Hutson also suggests that, because the Hope Scholarship Credit was recently enacted, and available only beginning in tax year 1998, perhaps there has not been time to revise the pertinent regulations to address this situation. DFAS responds that in over a year no change to the JTR has been initiated and none is foreseen in the near future.