Board of Contract Appeals General Services Administration Washington, D.C. 20405 __________________________________ DENIED: July 30, 1999 __________________________________ GSBCA 14938-RELO IN THE MATTER OF SOL GILMAN Sol Gilman, Potomac, MD, Claimant. Ray E. York, Director for Systems and Procedures, Finance Directorate, Defense Finance and Accounting Service, Indianapolis, IN, appearing for Department of Defense. HYATT, Board Judge. Claimant, Sol Gilman, is a Department of the Army employee who was relocated from the Army Research Laboratory in Fort Monmouth, New Jersey to the Army Research Laboratory in Adelphi, Maryland under travel orders issued in December 1996, with a reporting date in June 1997. He has requested the Board's review of a determination by the Defense Finance and Accounting Service (DFAS) concerning the proper calculation of the relocation income tax allowance paid in connection with his transfer. His principal contention is that his relocation income tax (RIT) allowance was insufficient because DFAS excluded interest income earned on home equity from the sale of his house in New Jersey from the calculation for reimbursement. For the reasons stated, we conclude that the agency calculated his RIT allowance properly. Background The Board has explained, in Robert J. Dusek, GSBCA 14325- RELO, 98-1 BCA ] 29,440 (1997), the statutory and regulatory framework applicable to the process of calculating allowances payable to relocated employees to offset increased taxes incurred as a result of the reimbursement of certain moving expenses. In essence, when an employee is transferred, in the interest of the Government, from one permanent duty station to another, the agency reimburses the employee for many of the expenses incurred incident to the transfer. The amounts reimbursed are reported to the Internal Revenue Service (IRS) as income to the employee and must be included in the gross income reported by the employee when filing a tax return. To the extent reimbursed expenses are not deductible, the employee incurs an increased tax liability. See id. at 146,172- 73. By law, agencies are to reimburse transferred employees for "substantially all" taxes incurred as a result of reimbursed moving expenses. 5 U.S.C. 5724b (Supp. III 1997). This statutory provision is implemented in the Federal Travel Regulation (FTR) and also in the Joint Travel Regulations (JTR) applicable to civilian employees of the Department of Defense (DoD). These regulations establish a two-step procedure in which the agency first calculates and pays a withholding tax allowance (WTA) and second calculates the RIT allowance. The WTA, which is calculated in accordance with a formula set out in the FTR and JTR, is intended to help offset amounts of federal income tax withheld from the reimbursed moving expenses, as well as federal income tax amounts withheld from the WTA itself. The RIT allowance is intended to reimburse the employee for any added tax liability not covered by payment of the WTA. The calculation of this allowance is similarly prescribed under procedures set forth in the FTR and is based upon assumptions jointly developed by the General Services Administration (GSA) and the IRS. A detailed explanation of how the formula is applied is set forth in Dusek. The relevant point for the purpose of reviewing this claim is that the formula does not allow agencies to take into account unearned income, such as interest and dividends, when determining an employee's combined marginal tax rate. 41 CFR 302-11.5(h), - 11.8(d), (e) (1996); JTR C16005-H, C16008-D. Mr. Gilman's claim is based on his disagreement with the way in which the agency calculated his WTA and RIT allowances. After moving to Maryland, he applied for his RIT allowance in April 1998. His concern is that while his combined federal, state and local taxes put him in a thirty-nine percent bracket, his RIT allowance was calculated based on a total tax rate of only 33.76 %. Thus, the RIT allowance he received was insufficient to fully offset added taxes paid. He states that the higher tax bracket was a result of the reimbursed moving expenses and the added interest income realized from the deposit in his bank of the home equity realized from the sale of his residence in New Jersey pending the purchase of a home in Maryland. He contends that the interest earned should have been included in his gross income in calculating the appropriate allowances to be paid. Discussion The direction to reimburse employees for. "substantially al" of the taxes incurred for reimbursed moving expenses does not mean that employees will be reimbursed for every dollar of tax liability incurred as the result of having received relocation benefits and allowances. John F. Stinson, GSBCA 14625-RELO, 99-1 BCA t 30,246; William A. Lewis, GSBCA 14367-RELO, 98-1 BCA T 29,532. The FTR states as follows: 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. 41 CFR 301-11.8(b)(2). With regard to the RIT allowance, the regulations further state that only earned income may be used in calculating the marginal tax rate. The additional interest income realized by Mr. Gilman as a result of depositing his home equity in the bank until purchasing a home in Maryland does not qualify as "earned income." DFAS properly followed the procedures provided in the pertinent regulations. There is no authority to recalculate the RIT allowance in the manner proposed by claimant. Mr. Gilman further notes that employees transferred from New Jersey were briefed on relocation entitlements and provided with a publication that addressed the RIT allowance. This publication did not state that income not reportable on a W-2 statement would be excluded when calculating tax brackets. To the extent Mr. Gilman is arguing that the advice provided by the agency was inadequate to alert him to the possibility that his taxes would be higher than anticipated, and thus erroneous, there is still no basis for requiring calculation of the RIT allowance in the manner sought by claimant. In the absence of independent authority for reimbursement of items claimed, it is immaterial that the Government's advice was erroneous or lacking in clarity, or that the employee may have relied on misinformation to his detriment. See, e.g., Cheryl A. Korman, GSBCA 14916- RELO (June 3, 1999). CATHERINE B. HYATT Board Judge