03-15573. Voluntary State Tax Withholding From Retired Pay

AGENCY:

Department of Defense, Office of the Under Secretary of Defense (Comptroller).

ACTION:

Final rule; amendment.

SUMMARY:

This rule amends 32 CFR part 78, Voluntary State Tax Withholding From Retired Pay, to comply with the Treasury Financial Manual, Volume 1, Section 5060f.

EFFECTIVE DATE:

This rule is effective June 20, 2003.

FOR FURTHER INFORMATION CONTACT:

Office of the Under Secretary of Defense (Comptroller), 703-604-6350.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

It has been determined that this rule is not a significant regulatory action. The rule does not:

(1) Have an annual effect to the economy of $100 million or more or adversely affect in a material way the economy; a section of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another Agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.

Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)

It has been certified that this rule does not contain a Federal mandate that may result in the expenditure by State, local and tribal governments, in aggregate, or by the private sector, of $100 million or more in any one year.

Public Law 96-354, “Regulatory Flexibility Act” (5 U.S.C. 601)

It has been certified that this rule is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. The amendments are required to update tax withholding procedures to comply with the Treasury Financial Manual, Volume 1, Section 506f and to update the Uniformed Services retired pay addresses.

Public Law 96-511, “Paperwork Reduction Act” (44 U.S.C. Chapter 35)

It has been certified that this rule does not impose reporting or recordkeeping requirements under the Paperwork Reduction Act of 1995.

Federalism (Executive Order 13132)

It has been certified that this rule does not have federalism implications, as set forth in Executive Order 13132. This rule does not have substantial direct effects on:

(1) The States;

(2) The relationship between the National Government and the States; or

(3) The distribution of power and responsibilities among the various levels of government.

List of Subjects in 32 CFR Part 78

• Income Taxes
• Intergovernmental relations
• Military personnel
• Pensions

Accordingly, 32 CFR part 78 is amended as follows:

PART 78—VOLUNTARY STATE TAX WITHHOLDING FROM RETIRED PAY

1. The authority citation for 32 CFR part 78 continues to read as follows:

Authority: 10 U.S.C. 1045.

2. Section 78.5(a) is revised to read as follows:

§ 78.5

Procedures.

(a) The Uniformed Services shall comply with the payment requirements of the state, city, or county tax laws. Therefore, the payment requirements (biweekly, monthly, or quarterly) of the state, city, or county tax laws currently in effect will be observed by the Uniformed Services. However, payment will not be made more frequently than required by the state, city, or county, or more frequently than the payroll is paid by the Uniformed Services. Payment procedures shall conform, to the extent practicable, to the usual fiscal practices of the Uniformed Services.

* * * * *

3. Section 78.5(g) is amended by removing paragraphs (g)(1) through (g)(7) and adding new paragraphs (g)(1) through (g)(4) to read as follows:

§ 78.5

Procedures.

* * * * *

(g) * * *

(1) Defense Finance and Accounting Service, Attn: DFAS/PRR/CL, 1240 East Ninth Street, Cleveland, OH 44199-2055.

(2) Coast Guard: Commanding Officer (RPB), U.S. Coast Guard Human Resources Service and Information Center, 444 S. E. Quincy Street, Topeka, KS 66683-3591.

(3) U.S. Public Health Service Compensation Branch, 5600 Fishers Lane, Room 4-50, Rockville, MD 20857.

(4) National Oceanic and Atmospheric Administration, Commanding Officer (RPB), U.S. Coast Guard Human Resources Service and Information Center, 444 S. E. Quincy Street, Topeka, KS 66683-3591.

* * * * *

4. Section 78.5(i) is amended by removing the third sentence and adding “The letter shall be addressed to the Director, Defense Finance and Accounting Service, 1931 Jefferson Davis Highway, Arlington, VA 22240.” in its place.

5. Section 78.5(j) is revised to read as follows:

§ 78.5

Procedures.

* * * * *

(j) Within 120 days of the receipt of a letter from a State, the Director, Defense Finance and Accounting Service, or designee, will notify the State, in writing, that DoD has either entered into the Standard Agreement or that an agreement cannot be entered into with the State and the reasons for that determination.

* * * * *

6. Section 78.7, Article IV—Reporting, is revised to read as follows:

§ 78.7

Standard Agreement.

* * * * *

Article IV—Reporting

Copies of Internal Revenue Service Form 1099R, “Distribution From Pensions, Annuities, Retirement, or Profit Sharing Plan, IRAs, Insurance Contracts, etc.” may be used for reporting withheld taxes to the State. The media for reporting (paper copy, magnetic tape, electronic file transfer, etc.) will comply with the state reporting standards that apply to employers in general.

* * * * *

Dated: June 6, 2003.

Patricia L. Toppings,

Alternate OSD Federal Register Liaison Officer, Department of Defense.