Board of Contract Appeals General Services Administration Washington, D.C. 20405 March 4, 1999 GSBCA 14758-RELO In the Matter of PATRICIA RUSSELL Patricia Russell, Fort Stockton, TX, Claimant. Stephen W. Loeffelholz, Chief, Billings and Collections Branch, National Finance Center, New Orleans, LA, appearing for Department of Agriculture. DANIELS, Board Judge (Chairman). In 1997, the Department of Agriculture's Rural Housing Service transferred one of its employees, Patricia Russell, to a new duty station in Fort Stockton, Texas. Ms. Russell and her family traveled to Fort Stockton in June and she began work there in July. The agency reimbursed her for expenses she incurred in relocating. It also paid her, in 1997, a withholding tax allowance (WTA). The next year, the agency informed Ms. Russell that she had to repay nearly half of the money it had paid as WTA. The employee has asked us to review the agency's demand for repayment. She has also asked that if we find the agency's position to be correct, the repayment be waived or an equitable schedule be established for repayment of the sum, which is beyond her means to pay immediately. Statute requires agencies to reimburse Government employees for "substantially all" of the income tax liability they incur as a result of having been repaid by their agencies for expenses of relocation from one duty station to another. See 5 U.S.C. 5724b(a) (Supp. II 1996). The Federal Travel Regulation contains complex procedures for implementing this command. 41 CFR pt. 302-11(1997). The regulation provides for reimbursement through a two-step process. In the year in which an agency repays an employee's relocation expenses, it shall also pay a WTA, which gives the employee more or less enough money to pay income taxes on (a) the amount of repayment of expenses and (b) the amount of the allowance itself. 41 CFR 302-11.7. In the following year, a relocation income tax (RIT) allowance which more precisely considers the employee's own tax circumstances is calculated. Id. 302-11.8. The regulation prescribes precise formulas for calculating these two allowances and allows no variation from either of the formulas. Id. 302-11.7(d), 11.8(f); see John F. Stinson, GSBCA 14625-RELO (Feb. 12, 1999); William A. Lewis, GSBCA 14367-RELO, 98-1 BCA 29,532; Robert J. Dusek, GSBCA 14325-RELO, 98-1 BCA 29,440 (1997). If the RIT allowance is less than the WTA -- in other words, if the WTA overcompensated the employee for the tax implications of the agency's repayment of relocation expenses -- the employee must repay the difference to the agency. Id. 302-11.9. We have performed all the calculations pertinent to Ms. Russell's move in accordance with the necessary formulas and find that the agency has followed the regulation admirably. The determinations of both the WTA in 1997 and the RIT allowance in 1998 are correct. Ms. Russell does indeed owe the agency the amount calculated. As the agency representative notes, the principal cause of the large disparity between the 1997 WTA and the 1998 RIT allowance is that the WTA was calculated, as required, on the assumption that the employee would owe twenty- eight percent of the expense repayments in income taxes,[foot #] 1 but her actual tax bracket was only fifteen percent. Not only was Ms. Russell's federal tax bracket low, but also, as a resident of Texas, she paid no state income taxes. See 41 CFR 302-11 apps. A-C. The Board may not waive a debt which is owed by an employee to an agency and which arises out of a previously-made payment relating to relocation allowances. The head of the agency may waive repayment of an employee's claim arising out of an "erroneous payment" of such an allowance, if the head determines that collection of the debt "would be against equity and good conscience and not in the best interests of the United States." 5 U.S.C. 5584(a); Randall L. Thurman, GSBCA 14067-RELO, 97-2 BCA 29,160; R. Patrick Comey, GSBCA 13640-RELO, 97-1 BCA 28,922. Whether the amount by which the 1997 WTA to Ms. Russell exceeded the appropriate RIT allowance was an erroneous ----------- FOOTNOTE BEGINS --------- [foot #] 1 The Federal Travel Regulation requires an agency to use a Federal withholding tax rate in calculating the WTA. Relocation expense payments "constitute supplemental wages for Federal income tax purposes, [so] an agency must withhold [from those payments] at the withholding rate applicable to supplemental wages." 41 CFR 302-11.7(c). The regulation explains that the "supplemental wages withholding rate" of twenty-eight percent "should be used in calculating the WTA unless under an agency's withholding procedures a different withholding rate is used pursuant to [Internal Revenue Service] tax regulations." Id. The Department of Agriculture's ___ withholding procedures contain no provision for use of a different withholding rate. ----------- FOOTNOTE ENDS ----------- payment is a question to be resolved by the Secretary of Agriculture, not the Board. (The 1997 WTA was not erroneous in its computation, but was in that it turned out to be more than the appropriate RIT allowance.) Whether collection of the debt would be against equity and good conscience and not in the best interests of the United States is also for the Secretary, not the Board, to decide. A debt owed by an employee to the United States may be collected in installments from the pay of the employee. 5 U.S.C. 5514(a)(1). The agency and the employee may enter into a written agreement which establishes a schedule for repayment of the debt. Id. 5514(a)(2)(C). If such an agreement cannot be reached, the employee may file a petition requesting a hearing on the matter. The hearing shall be conducted by an individual selected pursuant to regulations prescribed by the head of the agency. The individual must be either (a) not under the supervision or control of the head of the agency or (b) an administrative law judge. No later than sixty days after the filing of a petition, the individual selected will issue a final decision on the matter. Id. 5514(a)(2)(D), (b)(1). This Board has accepted requests from other agencies that it provide judges to conduct these hearings and issue decisions on these matters. It does so under separate agreement with agencies, however, and not in the context of settling a claim against the United States, as we do here. See 31 U.S.C. 3702(a)(3). _________________________ STEPHEN M. DANIELS Board Judge