[Federal Register: June 27, 2002 (Volume 67, Number 124)]
[Rules and Regulations]
[Page 43516-43520]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jn02-22]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2001-08; FAR Case 1997-032; Item III]
RIN 9000-AH96
Federal Acquisition Regulation; Relocation Costs
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) ``relocation costs''
cost principle by making allowable payments for spouse employment
assistance and for increased employee income and Federal Insurance
Contributions Act (FICA) (26 U.S.C. chapter 21) taxes incident to
allowable reimbursed relocation costs, increasing the ceiling for
allowance of miscellaneous costs of relocation, and making a number of
editorial changes.
DATES: Effective Date: July 29, 2002.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC, 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Jeremy Olson at (202) 501-3221. Please cite FAC
2001-08, FAR case 1997-032.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 64 FR 28330, May 25, 1999, that revised the cost principle
at FAR 31.205-35, Relocation costs, to--
Remove the numerous ceilings imposed on individual
relocation cost elements;
Recognize the growing commercial practice of reimbursing
relocation costs on a lump-sum basis in certain situations;
Make allowable payments for employment assistance for
spouses and for increased employee income and FICA taxes incident to
allowable reimbursed relocation costs;
Increase the ceiling for allowable miscellaneous
relocation costs; and
Make a number of editorial changes. The final rule amends
the FAR to--
Increase the limit for miscellaneous expenses when a lump-
sum approach is used. The current FAR requires the reimbursement of
miscellaneous expenses to be limited to actual expenses or $1,000 (if
the lump-sum approach is used). The proposed rule removed the $1,000
limitation in its entirety. To reduce the Government's risk in this
area, the final rule maintains a ceiling for miscellaneous expenses
when a contractor uses the lump-sum payment method, but increases the
limit from $1,000 to $5,000. The cost principle continues to have no
ceiling for miscellaneous expenses when reimbursement is based on
actual expenses;
Add two new categories of allowable relocation costs.
Consistent with the proposed rule, the final rule makes allowable two
categories of expenses that are currently unallowable: (1) Payments for
increased employee income and FICA taxes incident to allowable
reimbursed relocations costs, and (2) payments for spouse employee
assistance. Since contractors incur these types of costs in a good
faith effort to keep transferred employees from being adversely
affected by the relocation, it appears equitable to reimburse
contractors for these types of costs. In addition, the Employee
Relocation Council (ERC) data showed that it is a common industry
practice to reimburse relocating employees for both of these costs; and
Make a number of editorial changes, including revising the
``compensation for personal services'' cost principle at FAR 31.205-
6(e)(2) to clarify that the differential allowances paid to compensate
for increased taxes on employee compensation is unallowable, but that
the payments to compensate for increased taxes incident to allowable
reimbursed relocation costs is allowable.
Twenty-two respondents submitted public comments. The Councils
considered all comments when developing the final rule. A discussion of
the major comments follows:
Inadequate Analysis. One commenter expressed the opinion
that ``the proposed changes to FAR 31.205-35 have not been adequately
researched and the potential impact has not been documented.'' The
commenter went on to suggest that all of the proposed changes, except
for the lump-sum payment option, have been carefully considered by the
FAR drafters in the past and that those previous decisions should not
be overturned lightly and without thorough research and documentation
that demonstrate how the conditions have changed to make previously
rejected proposed changes now acceptable. In a related comment, another
commenter cautioned that ``the councils should carefully review the
information provided in response to the questions directed to industry
respondents to determine that the administrative time and cost savings
will offset increased costs before eliminating the ceilings.''
Response to Comments: As an integral part of its review of the
public comments submitted in response to this proposed rule, current
industry relocation practices were carefully analyzed (primarily using
data compiled by the ERC in its 1998 report entitled ``Relocation
Assistance:
Transferred Employees''), together with the past regulatory history
of the relocation cost principle.
Disagree With Removing Ceilings. Four commenters opposed
the removal of the current ceilings on individual relocation cost
elements, while two of them added that ``if the current limitations are
not adequate, they should be adjusted but not eliminated.'' These two
commenters disagreed with the Federal Register justification that the
``ceilings represent unnecessary micromanagement of contractor business
practices.'' One stated that ``cost ceilings are a means of controlling
business expenses reimbursed with taxpayer dollars,'' and the other
argued that ``the ceilings merely represent the maximum the Government
believes is reasonable.'' The commenter continued: ``The FAR ceilings
were initially implemented to assure that reasonableness determinations
were consistently applied to all contractors and that unreasonable
costs would not be paid because the cost principle is too general or
unenforceable.''
One commenter stated that ``the ceilings * * * are necessary to
protect the Government from liability for reimbursement of excessive
costs.'' Another maintained that since the 14 percent limitation on
closing costs and
[[Page 43517]]
the continuing costs of ownership of a former residence (FAR 31.205-
35(a)(3) and (4)) and the 5 percent limitation on costs for purchasing
a new home (FAR 31.205-35(a)(6)(ii)) were based on commercial industry
standards, there is no justification for their removal. Another stated
that these 14 percent and 5 percent caps appeared reasonable, but added
that waivers ``may be acceptable on a case-by-case basis.''
Response to Comments: Three alternatives were evaluated during
consideration of this issue: removal of the ceilings, adjustment of the
ceilings, and retention of the current ceilings. The alternatives are
discussed below:
Alternative 1--Remove Ceilings as Reflected in the Proposed Rule.
The ERC data indicated that some of the current FAR ceilings on
individual relocation cost elements were too low. One alternative to
eliminating this relationship is for the ceilings to be eliminated as
shown in the proposed rule, rather than adjusted. This alternative
would be a fundamental shift in how the Government evaluates the
allowability of contractor relocation costs. An argument can be made
that this change is consistent with promoting greater acceptance of
commercial practices. Under this approach, the Government would place
greater reliance upon contractors' individual corporate relocation
policies to limit such costs to reasonable amounts, rather than
continuing to micromanage contractor business practices. This would
involve a systems approach requiring greater use of professional
judgment by our auditors and contracting officers to ensure that
relocation costs in total are reasonable, which is more difficult than
utilizing a series of caps to determine cost allowability. This
alternative would tend to satisfy those who believe that the various
ceilings on individual relocation cost elements have made the current
cost principle unnecessarily detailed.
Alternative 2--Retain Ceilings With Appropriate Adjustments. This
alternative is more consistent with the argument that the rationale
behind the numerous past decisions to retain the ceilings was sound.
That is, (1) industry practice varies widely, (2) reasonableness
determinations should be consistently applied to all contractors, and
(3) the cost principle without ceilings is too general and
unenforceable. Further, the Federal procurement process argues for the
retention of the ceilings. Without these stated ceilings, contracting
officers would be put in the unenviable position of determining what
constitutes reasonable relocation costs without ready access to the
necessary information to make this determination. By performing the
necessary market research and setting reasonable ceilings in this cost
principle, the Government avoids the inefficient process of having
hundreds of different procurement personnel performing various levels
of research and making inconsistent determinations. The ceilings should
be set at a level that allows contractors to be reimbursed for
reasonable relocation costs that are not unallowable.
Alternative 3--Retain Current Ceilings but Reevaluate.
The basis for this alternative is that the rationale supporting a
shift either to eliminate or to adjust the ceilings is incomplete, and
a reasoned policy change cannot be made at this time. There is
sufficient information to justify evaluation of whether a policy change
should be considered, but there is not sufficient information to
determine what a better policy might be. This is the approach adopted
by the FAR Council.
Lump-Sum Approach.
Lump-Sum Approach Would Result in Savings. Nine commenters argued
that an expanded lump-sum approach would result in significant savings
for contractors and the Government. One stated that at a Government
business segment using a lump-sum approach, instead of an actual and
reasonable method, savings achieved for the temporary living portion of
relocation costs averaged $4,432 per relocated employee for a total
savings on Government contracts of almost $200,000 per year. Similarly,
another indicated that it is experiencing savings of $6.4 million per
year by offering a lump-sum option for reimbursement of temporary
living expenses to relocated employees in its commercial segments. This
commenter projected that it has ``the potential to save an additional
$1 million per year by offering the same option within its businesses
that sell goods and services to the U. S. Government.'' Another
commenter indicated an estimated saving of between $400,000 and
$500,000 per year due to the lump-sum relocation option.
Disagree With Lump-Sum Approach. One commenter objected ``to the
lump-sum payment as proposed because it would increase administrative
cost with no evident benefit for the Government.'' The commenter added
that ``few contractors use a lump-sum approach for total relocation
cost,'' and expressed concern that ``expanding the lump-sum approach
beyond miscellaneous expenses (for which a lump-sum up to $1,000 is
already permitted) would make it virtually impossible to assure that
the lump-sum payment does not include unallowable costs.'' While not
directly opposing an expanded use of the lump-sum approach, three other
commenters expressed concerns that ``in the absence of a database that
establishes what constitutes reasonable relocation expenses in various
locations, contracting officers will have difficulty negotiating
advance agreements on a broad range of relocation expenses.'' One
commenter added: ``Without some objective data, it is unreasonable to
impose the burden of determining reasonableness on the contracting
officer.''
Response to Comments: Review of the ERC data found that there is no
current industry practice of using lump-sum reimbursements for the
purchase or sale of a home. It appears inappropriate for the cost
principle to recognize lump-sum payments for these types of relocation
costs if there is no evidence of such an industry practice.
Additionally, an industry association commenter noted that in its
survey of member companies, ``no respondent used the lump-sum approach
on all relocation costs.'' Accordingly, the broad lump-sum
reimbursement approach was removed from the rule.
The lump-sum reimbursement approach covering miscellaneous expenses
only that is currently in the FAR was retained, but the ceiling amount
was increased from $1,000 to $5,000. An unlimited lump-sum for
miscellaneous expenses could easily become a sub rosa vehicle for
reimbursing unallowable costs (such as a loss on the sale of a home) or
for awarding a hidden bonus to the relocating employee. While some
commenters contend that contractors and the Government will share in
cost reductions through use of lump-sum payments, others believe the
opposite will occur. No convincing data were found one way or the
other. This is further bolstered by indications from ERC that companies
use lump-sum reimbursements primarily to improve employee morale and to
reduce administrative costs. The net cost impact is unclear. This issue
may be pursued again in a separate FAR case to determine if there is a
clear answer justifying adoption of a broader lump-sum approach.
Remove Mandatory Advance Agreement Requirement for Lump-
Sum Approach. Eight commenters recommended that the requirement for an
advance agreement with the Government prior to using the lump-sum
payment option be eliminated.
[[Page 43518]]
Some argued that ``the requirement for an advance agreement is not
necessary'' because ``lump-sum payments are an accepted commercial
practice'' and ``are more cost effective than actual cost tracking.''
One added that ``at times, whether or not an advance agreement is
executed depends on subjective rather than objective factors.'' It
added that ``inconsistent actions concerning the execution of an
advance agreement on lump-sum payments could put companies on an
unequal footing when bidding on Government contracts.'' Another
observed that ``formal acceptance by the contracting officer of what is
likely to be a case-by-case implementation of lump-sums is not
consistent with streamlining or acceptance of commercial practices.''
Another stated that the mandatory advance agreement requirement ``is
contrary to the spirit of Acquisition Reform'' and ``creates another
administrative burden.''
Response to Comments: The original rationale for including a
mandatory advance agreement requirement in the proposed rule was to
give the Government additional control over the broadly worded lump-sum
guidance. However, we have revised paragraph (b)(2) of FAR 31.205-35 to
delete the mandatory advance agreement requirement, since we have
removed the lump-sum approach from the rule.
Disagree/Agree With Removing Mortgage Interest
Differential and Rental Differential Payments. Two commenters saw no
reason for removing the specific references to mortgage interest
differential and rental differential payments currently found at
paragraphs (a)(7) and (a)(8) of FAR 31.205-35. One stated: ``Our survey
data, along with analysis of published relocation survey data, did not
demonstrate any significant difference in conditions that exist now
versus conditions that existed when these provisions were included in
the cost principle. Therefore, we cannot determine the basis for the
statement that coverage of these types of costs is no longer needed.''
Conversely, another commenter expressed its belief that ``eliminating
paragraphs FAR 31.205-35(a)(7) and (8) will provide the advantage of
simplification without adding costs to the Government.''
Response to Comments: Although interest rates are currently very
low and the impact of interest differential is now very limited,
interest rates could increase in the future. We have added both of
these types of payments back into the paragraph (a) list of allowable
relocation costs.
Delete FAR 31.205-35 (a)(1) thru (a)(9). Three commenters,
noting that the proposed rule would remove the specific references to
mortgage interest differential and rental differential payments,
expressed concern ``that Government auditors may assert that these
costs are now unallowable, notwithstanding the statements pertaining to
them included in the background section of this proposed rule.'' To
avoid such disputes over these and other relocation costs not
specifically mentioned under paragraph (a), they suggested that the
whole list of allowable relocation costs at FAR 31.205-35(a) (1) thru
(a)(9) be deleted.
Response to Comments: The Councils agree that removing the specific
references to mortgage interest differential and rental differential
payments from the cost principle could create confusion about the
future allowability of such costs, and they have added both of these
types of payments back into the paragraph (a) list of allowable
relocation costs. The Councils are also convinced there is great
benefit in making it absolutely clear that the listed types of
relocation costs in paragraph (a) are allowable and do not think this
list should be deleted.
Agree/Disagree With Making Spouse Employment Assistance
Payments and Tax Gross-Ups Allowable. Eight commenters agreed with the
equitable treatment rationale in the Federal Register for making two
new categories of relocation costs allowable: (1) Payments for spouse
employment assistance, and (2) payments for increased employee income
and FICA taxes incident to allowable reimbursed relocation costs
(commonly referred to as ``tax gross-ups''). Several commenters
``applauded'' this change which, as one commenter put it,
``acknowledges that contractors find it necessary to make such payments
to avoid unfairly penalizing the relocating employee.''
On the other hand, another commenter found it ``illogical'' to use
the ``good faith effort'' rationale to allow these costs, but not the
other unallowable relocation costs. However, after noting that ``there
is some evidence that spousal employment assistance is becoming a
general industry practice,'' that commenter stated that it does ``not
object to the reconsideration of the allowability of spouse employment
assistance (subject to reasonable limitations) after adequate research
and analysis is performed.''
Regarding tax gross-ups, that commenter quoted from a 1985 Cost
Principles Committee report: ``We believe that there was no
Congressional intention to grant tax relief to contractor employees,
but that it was the intent to grant such relief to Federal employees in
order to reduce the out-of-pocket costs heretofore being borne by
Federal employees.'' That commenter also pointed out that past Cost
Principles Committee reports have concluded tax gross-ups are actually
a compensation cost, and not a relocation cost. Finally, the commenter
disagreed ``with the theory that contractors should be reimbursed for
these types of costs merely because Federal employees are.'' In support
of this position, the commenter cited OFPP's 1986 ``Study of Relocation
Costs,'' which found that ``the policies governing the payment for
contractor relocation should remain separate from the policies
governing the relocation benefits paid to Federal employees.''
Response to Comments: The ERC data showed that it is a common
industry practice to reimburse relocating employees for both of these
costs. The Councils believe they are bona fide relocation costs and
that it is fair to make them allowable now on Government contracts,
just as it was fair to begin reimbursing Federal employees for them.
Apparent Conflict Between Tax Gross-Ups and Taxes Cost
Principle. One commenter noted an apparent conflict between the new
language allowing tax gross-ups for reimbursed relocation costs and the
taxes cost principle provision that makes Federal income taxes
unallowable (FAR 31.205-41(b)(1)).
Response to Comments: The Councils do not see a conflict. The taxes
cost principle makes contractor Federal income tax payments
unallowable, not contractor reimbursements to an employee for the
relocating employee's increased tax liability.
Federal Employees Do Not Get Tax Gross-Ups on FICA. One
commenter noted that ``Government employees are reimbursed income taxes
on relocation reimbursements, but not FICA. Employees, particularly
employees of private contractors, theoretically receive a future
benefit from increased FICA contributions. Therefore, reimbursement of
FICA could be considered inappropriate, and we would recommend
reimbursement of income taxes, but not FICA.''
Response to Comments: The Councils disagree with this
recommendation. They do not believe the allowability of contractor
relocation costs must always parallel the treatment afforded relocating
Federal employees; nor do they see uncertain future benefits as a valid
reason for excluding FICA from
[[Page 43519]]
allowable contractor tax gross-ups. The Councils believe this is a bona
fide relocation cost, which should be made allowable.
Administrative Costs Will Decrease/Increase. Thirteen
commenters agreed with the Federal Register rationale that the proposed
rule would reduce administrative costs. As one commenter put it: ``We
believe that the proposed changes would result in savings to both
contractors and the Government by reducing or eliminating a number of
burdensome administrative processes. For instance, with the elimination
of thresholds, contractors would no longer need to track applicable
costs separately and compare them to artificial thresholds. Detailed
training on how to apply the thresholds would no longer be required. We
believe that, to the extent that contractors find it otherwise
appropriate and feasible to adopt lump-sum practices, record-keeping
requirements would be reduced for both the contractor and the
relocating employee. Finally, internal and external oversight
requirements would be streamlined.''
In contrast, two commenters maintained that administrative costs
would increase under the proposed rule. One argued that ``audit effort
will necessarily increase (as will the contractor support of the
increased audit effort) since instead of having stated reasonableness
limitations, the auditor will now be forced to evaluate individual
contractor systems for assuring reasonableness.'' The commenter added
that ``using a broad criterion such as reasonableness naturally leads
to differences of opinion,'' which ``will result in increased disputes
which will increase the effort required by contractors, contracting
officers, and the courts to settle these disputes.'' Finally, the
commenter stated: ``Our survey of Government contractors found that the
administrative cost incurred by contractors to comply with the
requirements of FAR 31.205-35 is immaterial. Any potential savings
would certainly be offset by the administrative cost involved in
obtaining an advance agreement for the use of lump-sum payments.'' The
other commenter expressed concern that ``without the ceilings, we
anticipate contracting officers will need to perform a greater amount
of analysis to determine the reasonableness of a contractor's proposed
relocation costs.''
Response to Comments: The Councils expect that adoption of the rule
will result in reduced administrative burden for contractors and
increased administrative burden for the Government; but, they have no
way to quantify these anticipated impacts. They do not consider an
increase in the Government's administrative effort, by itself, to be a
valid reason for retaining the existing FAR language.
Relocation Costs Will Increase. Three commenters argued
against the proposed rule because they believed it will result in
higher relocation costs being claimed under Government contracts. Based
on its own analysis of more than 50 Government contractors, one
commenter projected that ``the proposed rule may result in more than
$130 million in additional relocation costs claimed by Government
contractors annually.'' However, another commenter countered that
``concerns about added costs or potential savings that may result from
a policy change should be irrelevant to the objective at hand; i.e.,
ensuring that the Government pays fair and reasonable expenses under
noncompetitive and cost reimbursable contracts.''
Response to Comments: While relocation costs claimed on Government
contracts may increase if the proposed rule is adopted, that is not a
valid argument for retaining the existing FAR language. The Councils
believe the cost principles should ensure that contractors are treated
fairly, consistent with sound public policy. The cost principles should
not be used as a cost containment mechanism.
This is not a significant regulatory action, and therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because most contracts awarded
to small entities use simplified acquisition procedures or are awarded
on a competitive, fixed-price basis and do not require application of
the cost principles contained in this rule.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
List of Subjects in 48 CFR Part 31
Government procurement.
Dated: June 19, 2002.
Al Matera,
Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth
below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
2. Revise paragraph (e)(2) of section 31.205-6 to read as follows:
31.205-6 Compensation for personal services.
* * * * *
(e)(1) * * *
(2) Differential allowances for additional Federal, State, or local
income taxes resulting from domestic assignments are unallowable.
(However, payments for increased employee income or Federal Insurance
Contributions Act taxes incident to allowable reimbursed relocation
costs are allowable under 31.205-35(a)(10).)
* * * * *
3. Revise paragraphs (a), (b), (c), and (f)(1) of section 31.205-35
to read as follows:
31.205-35 Relocation costs.
(a) Relocation costs are costs incident to the permanent change of
assigned work location (for a period of 12 months or more) of an
existing employee or upon recruitment of a new employee. The following
types of relocation costs are allowable as noted, subject to the
limitations in paragraphs (b) and (f) of this subsection:
(1) Costs of travel of the employee and members of the employee's
immediate family (see 31.205-46) and transportation of the household
and personal effects to the new location.
(2) Costs of finding a new home, such as advance trips by the
employee or the spouse, or both, to locate living quarters, and
temporary lodging during the transition period for the employee and
members of the employee's immediate family.
(3) Closing costs incident to the disposition of the actual
residence owned by the employee when notified of the transfer (e.g.,
brokerage fees, legal fees, appraisal fees, points, and finance
charges), except that these costs, when
[[Page 43520]]
added to the costs described in paragraph (a)(4) of this subsection,
shall not exceed 14 percent of the sales price of the property sold.
(4) Continuing costs of ownership of the vacant former actual
residence being sold, such as maintenance of building and grounds
(exclusive of fixing up expenses), utilities, taxes, property
insurance, and mortgage interest, after the settlement date or lease
date of a new permanent residence, except that these costs, when added
to the costs described in paragraph (a)(3) of this subsection, shall
not exceed 14 percent of the sales price of the property sold.
(5) Other necessary and reasonable expenses normally incident to
relocation, such as disconnecting and connecting household appliances;
automobile registration; driver's license and use taxes; cutting and
fitting rugs, draperies, and curtains; forfeited utility fees and
deposits; and purchase of insurance against damage to or loss of
personal property while in transit.
(6) Costs incident to acquiring a home in the new work location,
except that--
(i) These costs are not allowable for existing employees or newly
recruited employees who were not homeowners before the relocation; and
(ii) The total costs shall not exceed 5 percent of the purchase
price of the new home.
(7) Mortgage interest differential payments, except that these
costs are not allowable for existing or newly recruited employees who,
before the relocation, were not homeowners and the total payments are
limited to an amount determined as follows:
(i) The difference between the mortgage interest rates of the old
and new residences times the current balance of the old mortgage times
3 years.
(ii) When mortgage differential payments are made on a lump-sum
basis and the employee leaves or is transferred again in less than 3
years, the amount initially recognized shall be proportionately
adjusted to reflect payments only for the actual time of the
relocation.
(8) Rental differential payments covering situations where
relocated employees retain ownership of a vacated home in the old
location and rent at the new location. The rented quarters at the new
location must be comparable to those vacated, and the allowable
differential payments may not exceed the actual rental costs for the
new home, less the fair market rent for the vacated home times 3 years.
(9) Costs of canceling an unexpired lease.
(10) Payments for increased employee income or Federal Insurance
Contributions Act (26 U.S.C. chapter 21) taxes incident to allowable
reimbursed relocation costs.
(11) Payments for spouse employment assistance.
(b) The costs described in paragraph (a) of this subsection must
also meet the following criteria to be considered allowable:
(1) The move must be for the benefit of the employer.
(2) Reimbursement must be in accordance with an established policy
or practice that is consistently followed by the employer and is
designed to motivate employees to relocate promptly and economically.
(3) The costs must not be otherwise unallowable under subpart 31.2.
(4) Amounts to be reimbursed shall not exceed the employee's actual
expenses, except that for miscellaneous costs of the type discussed in
paragraph (a)(5) of this subsection, a flat amount, not to exceed
$5,000, may be allowed in lieu of actual costs.
(c) The following types of costs are unallowable:
(1) Loss on the sale of a home.
(2) Costs incident to acquiring a home in the new location as
follows:
(i) Real estate brokers' fees and commissions.
(ii) Costs of litigation.
(iii) Real and personal property insurance against damage or loss
of property.
(iv) Mortgage life insurance.
(v) Owner's title policy insurance when such insurance was not
previously carried by the employee on the old residence. (However, the
cost of a mortgage title policy is allowable.)
(vi) Property taxes and operating or maintenance costs.
(3) Continuing mortgage principal payments on a residence being
sold.
(4) Costs incident to furnishing equity or nonequity loans to
employees or making arrangements with lenders for employees to obtain
lower-than-market rate mortgage loans.
* * * * *
(f) * * *
(1) The term of employment is 12 months or more;
* * * * *
[FR Doc. 02-15942 Filed 6-26-02; 8:45 am]
BILLING CODE 6820-EP-P