RENTAL SURVEY (Sanitized)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-00261R000500070014-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 11
• Document Creation Date: December 9, 2016
• Document Release Date: August 30, 2000
• Sequence Number: 14
• Content Type: MF

7 ,.
*OGC Has Reviewed*
Approved For Release 2001/09/01 : CIA-RDP81-00261 R000500070014-9
.25X1A
MEMORANDU,M, FOft:
FROM:
A SUBJECT:
Acting Deputy Director for Administration
James H. McDonald
Director of Logistics
Harry E. Fitzwater
Director of Training
Rental Survey -
1. Action Requested: Paragraph 4 contains a set of
recommendations or Your approval.
2. Background:
a. Office of Logistics, Real Estate and Construction
leted a rental survey at
Ir,
D
m
(O
EC
) co
p
25X1A in Aut7u 1 10 , -- - , was ; ,
was commissioned
implements rather
25X1A to resurvey did so in late 1976 and submitted its findings
Revie of the _ survey 25X1A
to this Agency in February 192
revealed that it followed. Circular A-45 literally and the
recommended rate schedule would result in an average ISO percent
increase to occupants. Since that time the affected components
have studied the situation intensively to resolvethe dilemma 5o11
putting the Agency in the posture of complying
and the resultant Bureau of Budget Circular A-45 while maintaining
25X1A reasonable rental rates at -?
b. Part?of the problem stems from the ambiguity" of
the establishment of the
the laws and regulations governing
rental program. On the one hand agencies are admonished not to
set rental rates so low as to "provide an inducement in the
recruitment or retention of employees" and follows immediately
UNCLASSIFIED when
separate from OL 7 3499a
attachment
 Approved For Release 200AW9f61 : CIA-RDP81-00261 R000500070014-9
SUBJECT: Rental Survey
by stating that rates "reflecting reasonable value should not
operate as a barrier in recruitment or retention of
employees . . ." The key is the tern "reasonable value"
which is a difficult standard to apply. Consequently, other
Government agencies have made very liberal interpretations of
the Circular. The Department of Interior, which has some
13,000 rental units, recently completed a st.udy.and found that
its average basic rent (this excludes utility charges) was S61
per month per unit. It has also been confirmed that Interior
employees claim a deduction on their Federal tax return for
reimbursements made to the Government for quarters (some li:S
districts allow deduction of the total charge while others
allow only a deduction for basic rent). Some bureaus within
Interior actually provide their employees an annual statement
of monies withheld for housing which the employee attaches to
his tax return much as they do the h-2 form. You will recall
may not be taken for rents paid to the Government. However, in
light of now information, this matter will be pursued further.
, advised that such deductions
c. It became apparent in recent (July) discussions
with Interior and the Federal Aviation Acimin1stra ti.on (IFAA)
that these and other elements of the U.S. Government arc
administering much larger programs than CIA; that they are
doing so in a very liberal manner; and that OW has posed no
objections or made any attempt to enforce the strictures of its
admittedly outdated Circular A-45. Another example concerns
establishment of utility rates. A valid employee objection
concerns payment of excessively high utility rates because the
assigned quarters arc poorly insulated. To solve this type of
situation, Interior has adopted a system of charging the
employee a flat $50 per month with the Government paying 90 per-
cent of the balance (the employee being liable Cor the remainder).
d. In light of the above , OL and OTI: have dotcrmi.ned25X1A
that the rates proposed in the-survey do not prov.iac
reasonable value to the cmp.loyee/tcnant. and further, that
imposition of those rates would indeed act as a harries to the
recruitment and retention of the ca.l.ihnr of eniniuvec: i 'u!ulircd to
25X1A accomplish the sensitive training. iniss ion ass igned to JJJ1 The 25X1A
-survey has been retained to provide a data base. From this
base certain reductions have been made both in the basic rent
 Approved For Release 2f)6/01 : CIA-RDP81-00261R000500070014-9
SUBJECT: Rental Survey -
and the utility rate. These reductions avcr,+pc 30-40 percent
in both categories. The basic rent was reduced to compcnsate
for the deprivation of liberty which has been fully documcr,.tcc:
in previous correspondence on the subject (see Attachment M.
Utility rates have been reduced based on a Bureau of Standar;c
study to determine average heat loss/gain of the quarters'`csit
is the intention of the quarters responsible
will be individually r.etc:rud
become available, the qand a program to upgrade the insulation to meet current
standards will be undertaken.
c. 'Attached hereto are the proposed rates and a pro- 25X1A
posed regulation governing the quarters situation at
Based on discussions with other Government agencies ~, 11.c 1 have
deviated drastically from Circular A-4S, it is sufficient to
submit our rate schedules and policies to the ;assistant
Administrator for Logistics, OMB. We may also, of course,
submit them along with the other data requested at thearcguiar.ly
scheduled OMB Budget Review. A rcpresentati.vc, at De
Interior has further advised that 0MB has neither the expertise
nor the time to undertake a Tevision of the Circular. Interior
has been requested, therefore, to talc the lead in pynpariu
a revised circular and the Agency, if it" so des.i res, may
participate in the preparatory stage.
3. Staff Position:
a. Both OL and OTR concur in the recommcndatio,ls
contained in paragraph 4 below.
b. In effect, the recommendations have been coordi-
nated in a conceptional sense with several other elements of
the U.S. Government, specifically the Department of Interior
and the FAA.
261 R00050.007001.4V) -
 Approved For Release 231.89/01 : CIA-RDP81-00261R000500070014-9
SUBJECT: Rental Survey -
RccomRmCndat ions: I
That you approve the proposc:1 rct;ul:ati on .
be vigorously pursued.
(Attachment 1) as Ac,cncy policy.
b. That the RECD rates contained in .Attaciir Cnt
(Columns 5, 6 and 7) be approved.
c. That imposition of the ncw rate be effected on
1 October 1977 and that, due to the magnitude of the increases
collection be spread over a 12-month period with no further
increases due until the February 1979 Consumer Price Index.
d. That future year budgets contain funds for meters
uartcrs at -, at which time 25X1A
and upgrading insulation of q
utility charges will be collected on the basis of actual
consumption at the prevailing conunercial rate.
c. That OMB be provided copies of the new rent/
utility schedules as well~as the policy governing habitation
of quarters
f. That, in light of the tax relief currently a c fo ,.ded f other empioyccs of the U.S. Government, the ,`meet o o >lax~~~
deductions for rents/utilities reimbursed by t:
 Approved For Releas
SU1;JECT: 1 cntal Survey
APPRROVED:
DI S)PPROVID :
Acting Deputy Director foi ~1u iinis~ratlo;;
DATE: 2 9 AUG 1977
Attachments
Orin; OL Official w/atts
2 - A-DDA w/atts
1 - 0'1?R w/atts
t,i
9/01.: C1A-RDP81-00261 R000500070014-9
 OCC 7c 07.9i11
Approved For Release 2001/09/01 : CIA-RDP81-002W1Fi8Ga5FY007166'k-9
MEMORANDUM FOR: Director of Logistics
25X1A
FROM:
SUBJECT:
REFERENCE:
Income Tax Deductions for Rental Payments for
Government Quarters .
Memo to C/O&MLD/OGC, fm D/OL, Subj: Income Tax
Deductions for Government Quarters Rental Payments,
dtd 19 Oct 77 .
1. Via referent memorandum, you requested that this.Officc provide a
legal opinion on w-iether the rents paid to the Government by Agency employees
for quarters at the may be excluded from gross income.
It is understood that " [a] 11 personnel assigned to are required to 25X1A
reside on Base...." OTR Instruction TRI 45-3, 13 September 1977. in addition,
pursuant to that determination and 5 U.S.C. 5911(e), you deduct from each
employee's gross salary the rental cost of his quarters. Also, we have been
asked informally to provide the same guidance with respect to utility payments.
2. The law applicable to your question is section 119 of the Internal
Revenue Code of 1954, as amended, which provides, in pertinent par6:
There shall be excluded from gross income of an employee
the value of any meals or lodging furnished to him by his
employer for the convenience of the employer, but only if--
(2) in the case of lodging, the employee is
required to accept such lodging, on the business premises
of his employer as a condition of his employment.
In determining whether meals or lodging are furnished for the
convenience of the employer, the provisions of an employment
contract or of a State statute fixing terms of employment shall
not be determinative of whether the meals or lodging are in-
tended as compensation.
a
 ? furnished to the employee free of charge. However, in Eo ykin v. Commissioner,
260 F 2d 249, 254 (CA 8, 1958), it was stated:
IF.SpproYeolr(ff gl sae0Puq/c21.: CIA-RDP81-002618000500070014-9
The value of lodging furnished to an employee by the
employer shall be excluded from the employee's gross income
if three tests are met:
(1) The lodging is furnished on the business
premises. of the employer,
(2) The lodging is furnished for the conven-
ience of the employer, and
(3) The employee is required to accept such
lodging as a condition of his employment.
The'requirement of subparagraph (3) of this paragraph that
the employee is required to accept such lodging as a condition
of his* employment means that he be required to accept the
lodging in order to enable him properly to perform the duties
of his employment. Lodging will be regarded as furnished
to enable the employee properly to perform the duties of his
employment when, for example, the lodging is furnished be-
cause the employee is required to be available for duty at all
times or because the employee could not perform the services
required of him unless he is furnished such lodging . If the
tests described in subparagraphs (1), (2), and (3) of this
paragraph are met, the exclusion shall apply irrespective of
whether a charge is made, or whether, under an employment
contract or statute fixing the terms of employment, such
lodging is furnished as compensation. If the employer
furnished the employee lodging for which the employee is
charged an unvarying amount irrespective of whether he
accepts the lodging, the amount of the charge made by the
employer for such lodging is not, as such, part of the compensa-
tion includible in the gross income of the employee; whether
the value of.the lodging is excludable from gross income under
section 119 is determined by applying the other rules of this
paragraph. If the tests described in subparagraphs (1), (2),
and (3) of this paragraph are not met, the employee shall include
in gross income the value of the lodging regardless of whether it
exceeds or is less than the amount charged. In the absence of
evidence to the contrary, the value of the. lodging may be deemed
to be equal to the amount charged.
3 Most of the cases interpreting section 119 deal with housing being
 Approved For Release 2001/09/0': CIA R P>3'Io-ROR?1F~QQ.0500070014-9
.. [U] nder our interprets ,)n o~ _ ec i
believe that, if the conditions imposed by section 119 (2) are
fully met, the value of the lodging furnished t e taxpayer is
excludable from gross income, regardless of whether such
lodging constitutes compensation, .. .
The Internal Revenue Service has acquiesced in this decision, Revenue Ruling
59-307, 1959-2 CB 48:
The Internal Revenue Service will follow the, decision
of the United States Court of Appeals for the Eighth Circuit
In
in J. Melvin Boykin v. Commissioner, 260 Fed. (2d)
that case, the court held that the rental value of living quarters
furnished on business premises by the employer to the employee
was properly excludable from the employee's gross income under
section 119 of the Internal Revenue R vas Code of
that the5~enc-reri tal valuegof tthe
arrangement bettiveen them living quarters was co from his salary. f the Thelfactsethere mpen-
sation and was deducted
considered clearly showed that the employee was required, for
the convenience of his employer, to accept such living quarters
as a condition of his employment.
In cases involving similar facts and circumstances,
employees will not be subject to Federal income tax on the amount
of their salary or wages'which is retained by their employers for
lodging furnished on the business premises for their employer's
convenience, where the employees are required to accept such'
erl
y.
lodging in order'to perform their duties prop
ti. .
4. With respect to the three tests, it is our opinion tht test
requirement t thethe
"business premises" of the employer) and test three (the l
e
th employment) is lesatisfied
are employee accept the lodging as a ' cond tio1en of his
and legally defensible. Test two (con of employer e settled although not so much as to requiteff c ~ t lleasonsnmustZetiist which bsnlity
of these expenses. Rather, strong and su
which, in ou view,
be put forth to counter an IRS challenge
hot sing whichltl c,Government
result. Almost certainly, the mere u
owns and needs to keep occupied is
the employee isso gUlYCld to belay a gable
quoted above uses the words "because
for duty at all times or ... could not perform the services required of him unless
he is furnished such lodging."
-3-
L9'1.^?~".'.:.,~"-'1~'qw"??~?'?~???~???, ??`w?S~l~iimSMARO'S,71K~~nquletlts..rw+rwwvw~nwr..r.r ~.w.w~+..
 tian presented, the c::c uc a,31 l
reference to the second clue ]9gFF''~~.. 11gg6$-2 C11 61, .provides
5. 0sq ed eRe1ea1&e"d (~~1 910~1~ Cfiq-RDP81-00261 R000500070014-9
e,
ilit
y
c,f ut
h ' as used in section 119 of the Code,
The term lodging r gas, water, and
furnished
encompasses items such as heat,
where can} employer
Accordingly,
{
sewerage .service.
utilities that were necessary to ou'n.t the m thelemployeeb e
and deducted an appropriate am
? compensation, the value of such utilitie
to beuequal to thetamount
~ ? employees by the employer (deeme e charged by the employer in the absence
employees' loyees'egrgsso nhc me,
contrary) may be excluded from P
where, as here, the value of the lodging itself is excludable
under section 119.
25X1A
is the opinion of this Office that rental payment omade
6, In conclusion, it ~ et out above may be e,;clu
? by Agency employees assigned to as set
? s{ gross income. Utility costs, if purchased in accordance With the
employe facts of -Revenue Ruling 6$?579, quoted supra, may also he excluded. However,
it should Agency management and by those employees
be clearly understood by inion, and is not dispositive
in'v'olved, that this OGC opinion is just that, an op
estion. In any tax question, the IRS is the final arbiter and nothing
of the question. anyone an entitlement
contained in this opinion shall be construed as providinb
not otherwise available in lw,, .
cc: D/OTR
T BP8 -00261 Rnnnk~0007001 d_A ~??" _..
 Approved For Release 2001/09/01 : CIA-RDP81-00261 R000500070014-9
Next 6 Page(s) In Document Exempt
Approved For Release 2001/09/01 : CIA-RDP81-00261 R000500070014-9
 Approved For Release 2001/09/01 : CIA-RDP81-00261 R000500070014-9
NBS Data
Based upon home insulation data obtained from the
National Bureau of standards for the latest 25X1A
appraisal, the electric rates for A-5 and A-24
have been
have been reduced 30% and the heating
reduced 350. Similar rates for the remaining houses
have been reduced 30% and 45a respectively.
Approved For Release 2001/09/01 : CIA-RDP81-00261 R000500070014-9