LETTER TO HONORABLE JAMES T. LYNN FROM W.E. COLBY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP77M00144R001100070021-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 20, 2016
• Document Release Date: October 12, 2006
• Sequence Number: 21
• Publication Date: August 8, 1975
• Content Type: LETTER

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Honorable James T. Lynn, Director
Office of Management and :Budget
Washington, D. C. 2.0503
Dear Mr. Lynn:
8 AUG 1375
I have a copy of Secretary Kissinger's letter to Secretary Simon
of 12 July 1975 expressing concern with a provision in proposed legislation
pending before the House Ways and Means Committee which would ixx-xpose-
Federal Income taxes on certain allowances paid to Federal employees
serving overseas. During the 93rd Congress, I wrote to Mx-... Roy Ash
on 10 December 1974 to express my concern about the adverse irripact
of a similar proposal on our overseas operations.
I fully endorse the views and recommendations. in Secretary
. Kissinger's letter.
It is understood that the proposed amendment to Section 917- of
the Internal. Revenue Code, which currently exempts those all.owance_ss
from Fedeal Income taxes., is being related to the proposed change,
in the treatment of income earned abroad by other Americans.
It is my understanding that Americans employed abroad by
private enterprise are generally managerial or executive personnel,
and that local nationals normally fill clerical and middle management
positions. Federal agencies cannot follow this practice and assign
many employees overseas in the middle and lower grades. The
allowances paid these and other employees are important to assure tl.at
those who are directed (in the case of CIA) to serve abroad are not
forced to absorb a financial burden in countries with a higher cost-of-
living than that of the United States and to.assure a staxndard. of living
consistent with requirements imposed upon them as representatives of
the Federal Government abroad.
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I am informed that two proposals are under consideration
within the Executive Branch to deal with the overseas allowance
question. One is to increase the allowances, and thus appropriations,
to offset the taxes to be levied. The other, which deals solely with the
housing allowance, would seek to establish a tax base figure equal to.
the amount an employee would reasonably be. expected to pay for
housing in the United States.
It is my view that in the long-run such adjustments would be.
burdensome and expensive to administer and inconsistent with. the
underlying concept of these allowances. They also could disrupt
our efforts to reduce the number of personnel overseas and improve
the efficiency of those who remain.
We are, of course, prepared to discuss both principles and
procedures in much greater detail if that is necessary to demonstrate
that the proposed changes would have a major adverse impact on the
efficiency of our operations. I strongly urge the Administration to
oppose a major change in the overseas allowance program at this time. -
W. E. Colby
Director
cc: Secretary of State
Secretary of the Treasury
Distribution:
Original - Addressee
1 - DCI
I - DDCI
1 a c;
1-DDA
1 - SS_A/DDA
l-OGC
I - D/OP
1 - D/OF
1 - OMB Liaison
- Dept. State L '.orison
1 - OLC Subj
1 - OLC Chrono
OLC/LLlvi:baa. (4 Aug 75
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