Senate bill would provide financial relief to civilian federal employees

congressU.S. Sens. Mark Warner (D-VA), Tim Kaine (D-VA), Susan Collins (R-ME), Chris Van Hollen (D-MD), and Mazie Hirono (D-HI) introduced bipartisan legislation to provide financial relief to certain civilian federal employees who move for work. The Relocation Expense Parity Act would close a loophole that prevents certain federal workers from having additional taxes on their moving expenses fully reimbursed.

The tax bill passed last year eliminated the deduction for job-related moving costs, as well as the exclusion for reimbursements or in-kind contributions made by employers to defray the cost of moving. As a result, employer reimbursements for moving costs – which were previously excluded – are now generally taxed at the same rate as ordinary income. This situation is causing a particular burden for civilian federal employees who, after being assigned to a new duty station, have discovered that hundreds or even thousands of dollars have been withheld from their paychecks, often with little advance notice, in order to cover the cost of taxes associated with moving reimbursements from the federal government. While the law excluded active-duty service members, the approximately 25,000 civilian federal workers — from military civilian employees to law enforcement and teachers — who move each year would have extra money withheld to cover the taxes on this “income” following the changes in the law. 

After receiving a letter from Sens. Warner and Kaine on this issue, the U.S. General Service Administration (GAO) clarified their rules so that agencies can now reimburse roughly 95 percent of the affected federal workers for this additional cost. However, a small slice of workers who receive moving reimbursements, generally new and retiring employees, are still not eligible. These federal workers owe taxes on their moving costs, and the government cannot cover the costs. The Relocation Expense Parity Act closes this gap by making any federal employee eligible for having moving costs paid also eligible for reimbursement for the additional taxes.

“Civilian federal workers uproot their entire lives and move to distant locations in service to their country. They shouldn’t have to pay a price for their commitment to public service,” said Sen. Warner. “This bipartisan legislation closes a remaining gap that prevents all federal employees from being fairly compensated for their willingness to serve our country.”

“Some hardworking families from Virginia are being stuck with a surprise tax bill when they begin or end their public service,” Sen. Kaine said. “We need to do something to fix this mistake. Additionally, this burden has made it harder for federal agencies to recruit and retain a talented workforce. Families shouldn’t be forced to foot the bill for these moves, and I’m proud we have a bipartisan effort to fix it.”

“When federal employees are required to relocate to continue their public service in a different part of the country or the world, they should not have to pay additional federal taxes due to reimbursement for moving costs,” said Sen. Collins. “Although the vast majority of federal workers are fully reimbursed for this additional cost, our bipartisan bill would ensure that the remaining five percent of affected workers are fairly compensated for their moving expenses.”

“Federal workers are tasked with the fundamental responsibility of serving to protect, promote, and preserve the rights and interests of the people of the United States. Employees ranging from FBI agents to teachers on our military bases can face a significant cost burden when moving to their duty stations or returning home,” said Sen. Van Hollen. “This legislation makes an important fix to ensure our federal employees are not doubly burdened through the new tax law. I was proud to join my colleagues in introducing this bipartisan legislation, and I will continue working to support our federal workforce with the resources they need to best serve the American people.”

“Hawaii’s civilian federal workforce plays a critical role in serving our veterans, protecting our environment, and keeping our country safe,” Sen. Hirono said. “Moving to Hawaii to assume a new role is often expensive, but our country is better off when our Federal workers are able to relocate for public service. At a time when Hawaii faces an overall provider shortage in our veterans’ health care system, this legislation helps to ensure that the cost of moving does not impede the important work federal employees do across the country every day.”

“The FBIAA supports the Relocations Expense Parity Act because it protects FBI Special Agents from new financial penalties resulting from mandatory relocation and the Tax Cuts and Jobs Act. As part of our work to protect the Nation, Special Agents sign mobility agreements that subject them to transfer to meet the needs of the FBI. These moves are often expensive for Special Agents and their families. The Tax Cuts and Jobs Act eliminates the moving expense deduction, which historically offset this financial burden. Now, Special Agents who relocate to serve the FBI will face thousands of dollars unnecessarily withheld from their pay because moving reimbursement is considered ordinary income. Special Agents make sacrifices for the nation every day and should not confront financial penalties as result of being willing to serve anywhere they are needed,” said Thomas O’Connor, President of the FBI Agents Association.

“Taxing moving allowances and benefits for new hires into the Department of Defense Education Activity will create a huge financial burden for these individuals and make the task of recruiting and hiring qualified employees for overseas locations much harder. Why would anyone agree to uproot themselves – and, in many cases, their families – in order to move halfway around the world if doing so will cause them to incur thousands of dollars in tax liability? And that’s on top of the enormous expenses and stresses anyone agreeing to relocate overseas for government work already faces. The fact is, DoDEA will find it increasingly difficult to find top-tier educators to come work in its schools and the military dependents who have come to rely on such excellent educators staffing DoDEA schools will the ones who suffer as a result,” said H.T. Nguyen, Executive Director of the Federal Education Association.

“I worked for DoDEA schools for decades, ensuring military dependents received a great education, and it was always with the understanding that the government would pay to move my family and our possessions back home when my DoDEA career ended. Suddenly, just months before I was set to retire, I learned the new tax law would make such moving assistance taxable, causing my tax liability for this year to increase by thousands of dollars. Being saddled with this tax debt is a huge unforeseen cost to retirees like myself. It deals a severe blow to my financial situation for retirement and I believe it will cause other current employees to delay their retirements because they cannot afford the tax bill they would incur by moving back home. We’ve been told throughout our careers that the government would pay to ship our stuff home when we left DoDEA. To suddenly make those moving services taxable to us is unfair and hurtful!” said Alex Veto, recently retired teacher from Vilseck High School in Germany, a Department of Defense Education Activity (DoDEA) school.

“NTEU appreciates Senators Warner, Kaine, Collins, Van Hollen, and Hirono’s bipartisan recognition that the recent tax code changes penalize federal employees who are required to move for work purposes risking their ability to continue to afford to perform their duties on behalf of the US government,” said Tony Reardon, President of the National Treasury Employees Union (NTEU).

“NARFE appreciates the hard work of Sen. Warner and his colleagues to correct an unintended consequence of the 2017 Tax Cuts and Jobs Act. The legislation inadvertently eliminated the tax deduction for work-related relocation expenses for federal employees. This saddled civil servants with heavy expenses as they were called upon to relocate in order to fulfill the American public’s needs. Although most of the burden has been alleviated, some public servants were not afforded relief by an administrative change and require a legislative fix. To that end, NARFE supports the Relocation Expense Parity Act, sponsored by Sens. Mark Warner, Tim Kaine, Susan Collins, Mazie Hirono and Chris Van Hollen, to provide relief to federal employees who are still not made whole from the increased tax expenses resulting from their work-related relocations. Federal employees should not have to foot the bill when they relocate in service to our nation,”said Richard Thissen, President of the National Active and Retired Federal Employees Association (NARFE).

More information about this bill can be found here. For the text of the bill, click here.


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