January 21, 1998 GSBCA 14367-RELO In the Matter of WILLIAM A. LEWIS William A. Lewis, Palm Beach Gardens, FL, Claimant. Al LaBombard, Chief, Employee Service, Austin Finance Center, Department of Veterans Affairs, Austin, TX, appearing for Department of Veterans Affairs. DANIELS, Board Judge (Chairman). Statute and regulation require agencies to pay various relocation benefits and allowances to employees who are transferred in the interest of the Government from one permanent duty station to another. See 5 U.S.C. ch. 57 subch. II; 41 CFR ch. 302. These payments are, for the most part, considered taxable income to the recipients. We recently discussed in some detail the provisions of law, 5 U.S.C. 5724b (1994) and 41 CFR ch. 302-11 (1996), which require agencies to pay these employees additional money to effectively compensate them for the taxes they incur consequent to their receipt of these benefits and allowances. Robert J. Dusek, GSBCA 14325-RELO (Dec. 4, 1997). The regulation establishes a two-step process for accomplishing this goal. In the year in which the agency pays the employee relocation benefits and allowances, it also pays a withholding tax allowance (WTA), which is intended to cover the increase in the employee's Federal income tax withholding liability that results from receipt of the benefits and allowances. 41 CFR 302-11.5(e), (n), -11.7(a). The WTA is calculated at a flat rate, regardless of the employee's tax bracket. Id. 302-11.5(g). In the following year, the agency calculates a relocation income tax (RIT) allowance, which makes further adjustments in payment, to reimburse the employee for any added tax liability that was not reimbursed by payment of the WTA, or to cause the employee to repay any excessive amount of WTA, based on the employee's actual tax situation. Id. 302-11.5(f)(2), (m), -7(e), -9(b). The statute requires that the WTA and RIT allowances cover "substantially all" of the additional taxes occasioned by the payment of relocation expenses. 5 U.S.C. 5724b(a). The regulation establishes specific procedures through which the allowances must be calculated. 41 CFR 301-11.8(d),(f), -9(a). It states, with specific regard to the RIT allowance, "The prescribed procedures, which yield an estimate of an employee's additional tax liability due to moving expense reimbursements, are to be used uniformly. They are not to be adjusted to accommodate an employee's unique circumstance which may differ from the assumed circumstances stated in paragraph (b)(1) of this section." Id. 301-11.8(b)(2). The procedures make earned income a factor in calculating the RIT allowance. The regulation provides that for its purposes, "appropriate earned income shall include only the amount of gross compensation reported on IRS [Internal Revenue Service] Form(s) W-2, and, if applicable, the net earnings (or loss) from self-employment income as shown on Schedule SE of IRS Form 1040." 41 CFR 302-11.8(d); see also id. 302-11.5(h). Application of this rule to William A. Lewis, an employee of the Department of Veterans Affairs, has caused Mr. Lewis to owe to his employer a significant sum of money, representing excessive WTA paid to him in the previous year. The employee and his wife paid taxes for that year on Social Security benefits received by her, but the benefits were reported as taxable income on a Form 1099, not a Form W-2, so they are not considered "earned income" for the purpose of calculating the RIT allowance. Mr. Lewis notes that if the benefits were to be considered earned income, his debt to the agency would be reduced almost to naught. Mr. Lewis, calling his situation "unfortunate" and "unfair," asks us to direct his agency to recalculate his RIT allowance on the premise that his wife's Social Security benefits were "earned income." We agree that the situation is unfortunate for Mr. Lewis. Whether it is also unfair is a debatable point, however. Neither the statute nor the regulation is designed to reimburse every employee for every dollar of tax liability he incurs as a result of having received relocation benefits and allowances. The statute requires only that the WTA and RIT allowances cover "substantially all" of the increased liability. "Substantial," in this sense, means less than the whole -- "that specified to a large degree or in the main." Webster's Third New International Dictionary 2280 (1986). To satisfy the statute's mandate, the regulation writers might have included Social Security benefits among the forms of income counted in calculating RIT allowances. The writers might also have included interest, or dividends, or capital gains, or rent, or any other form of income. They did not do any of these things, though, and their decisions not to include any one of them undoubtedly affect many transferred employees in many different ways. That does not make the regulation necessarily unfair or in any other way inconsistent with the statutory requirement, however. Mr. Lewis has not demonstrated that the WTA and RIT amounts he received did not cover a large degree or the main part of the increased taxes he had to pay on account of having received benefits and allowances related to his relocation. In any event, neither the Department of Veterans Affairs nor this Board may deviate from the precise directives of the law in calculating Mr. Lewis's RIT allowance. Mr. Lewis notes that in James P. Lenahan, B-256731 (Nov. 8, 1994), the General Accounting Office (GAO) opined that military retirement benefits may be included in earned income for RIT allowance purposes even though these benefits are reported on a Form 1099, rather than a Form W-2. The GAO reasoned that because these benefits were reported on a Form W-2 when the RIT regulation was written, the rule must be read to encompass this kind of compensation, even though the reporting requirement has changed. The claimant asks us to apply this analysis to the Social Security benefits received by his wife. We leave for another day a decision on whether to adopt the GAO's thinking, since even if we were to accept it, it would not apply to Mr. Lewis's situation. The Social Security Administration has informed us that at all times since the RIT regulation has been in effect, Social Security benefits have been reported on Form 1099. We conclude that the Department of Veterans Affairs properly followed the regulation by excluding from earned income, for the purpose of calculating Mr. Lewis's RIT allowance, the Social Security benefits received by Mrs. Lewis. _________________________ STEPHEN M. DANIELS Board Judge