Withholding of District of Columbia, State, City and County Income or Employment Taxes by Federal Agencies, 2149-2150 [06-238]

Agencies

• Fiscal Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 9 (Friday, January 13, 2006)]
[Rules and Regulations]
[Pages 2149-2150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-238]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 215

RIN 1510-AB06


Withholding of District of Columbia, State, City and County 
Income or Employment Taxes by Federal Agencies

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: The Financial Management Service is issuing this final rule 
which governs the withholding of District of Columbia, State, City and 
County income or employment taxes by Federal agencies. This rule 
revises the office within the Department of the Treasury which will 
correspond with government entities requesting that the Secretary of 
the Treasury enter into an agreement with them for the mandatory 
withholding of the requesting entity's taxes from Federal employees' 
salaries. The revision is necessary in order to streamline the process 
by which Treasury receives such requests and responds to them. The 
revision also updates the regulation by removing outdated provisions no 
longer applicable.

EFFECTIVE DATE: January 13, 2006.

FOR FURTHER INFORMATION CONTACT: James E. Knox, Financial Program 
Specialist, at (202) 874-6809; or Marc I. Seldin, Senior Attorney, at 
(202) 874-6863.

SUPPLEMENTARY INFORMATION: 

Background

    Pursuant to 5 U.S.C. 5516, 5 U.S.C. 5517, 5 U.S.C. 5520 and 
Executive Order 11997, the Secretary of the Treasury enters into 
withholding agreements with the District of Columbia, States, cities, 
and counties for the mandatory withholding of a jurisdiction's taxes 
from the salaries of Federal employees within a taxing jurisdiction. 
When a taxing jurisdiction wishes to enter into such a withholding 
agreement, it forwards a request to the Department of the Treasury 
(Treasury). Treasury reviews the request, determines whether it meets 
the statutory and regulatory requirements for such an agreement, and 
notifies the requesting taxing jurisdiction of Treasury's determination 
as to whether it will enter into a withholding agreement with the 
requesting taxing jurisdiction. Currently, Treasury's governing 
regulation, 31 CFR part 215, lists Treasury's Fiscal Assistant 
Secretary as the point of contact for such requests. Following receipt 
of such requests by that office, the requests are forwarded to 
Treasury's Financial Management Service (FMS), to which the Fiscal 
Assistant Secretary has delegated the authority to enter into such 
withholding agreements. In order to streamline the process by which 
Treasury receives and responds to requests to enter into withholding 
agreements, the revised rule amends Sec.  215.4 (which is redesignated 
as Sec.  215.3, as described below) to provide that requesting taxing 
jurisdictions will forward their requests directly to FMS, and FMS will 
respond to the requests. The revised rule also makes a conforming 
change to a definition set forth in Sec.  215.2(l).
    Additionally, the revised rule updates Sec. Sec.  215.1, 215.3, 
215.4, and 215.5 by deleting several outdated provisions which are no 
longer effective. Section 215.3, codified on July 1, 1977 and effective 
on that date, provided actions which could be taken within 90 days of 
that date. Section 215.5 provided details on the actions set forth in 
Sec.  215.3. The last sentence of Sec.  215.1 referenced the actions 
described in Sec. Sec.  215.3 and 215.5. Since the time for any such 
actions has long since expired, and for clarity, the revised rule 
deletes outdated provisions from Sec. Sec.  215.1 and 215.3, deletes 
Sec.  215.5 in its entirety (as it is no longer applicable), and makes 
conforming changes to Sec.  215.4. For convenience to the reader, Sec.  
215.3 and Sec.  215.4 are redesignated as Sec.  215.4 and Sec.  215.3, 
respectively. As a result of Sec.  215.5 being deleted, subsequent 
sections Sec.  215.6 through Sec.  215.13 are redesignated as Sec.  
215.5 through Sec.  215.12. In addition, the current rule references a 
``Standard Agreement'' for withholding, and a long-since expired 
opportunity in 1977 for requesting entities to request deviations from 
the Standard Agreement. Since there is only one withholding agreement 
which requesting entities may seek currently, for clarity, the term 
``Standard Agreement'' has been replaced by the term ``Withholding 
Agreement.''
    The revised rule also updates two definitions in Sec.  215.2 in 
order to conform to revisions made to an underlying statute, 5 U.S.C. 
5517, since the rule was last revised. The definition of ``State'' now 
specifically includes a territory, possession, or commonwealth of the 
United States. The citations referenced in the definition of ``Members 
of the Armed Forces'' are also updated. Neither of these

[[Page 2150]]

conforming changes revises current law, as they merely conform the rule 
to the underlying law. The revised rule also makes nomenclature 
revisions to the authority citation.

Regulatory Analyses

    This final rule is not a significant regulatory action as defined 
in Executive Order 12866. Therefore, a Regulatory Assessment is not 
required.
    Because this regulation merely affects internal agency 
organization, procedure and practice, and does not substantively change 
the current rule, no notice of proposed rulemaking is required by 5 
U.S.C. 553.
    Because no notice of proposed rulemaking is required, the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do 
not apply.
    This final rule is being issued effective upon publication because 
it merely affects internal agency organization, procedure and practice, 
and does not substantively change the current rule. Consequently, there 
is no requirement under 5 U.S.C. 553(d) for a 30-day or more period 
between the publication date and effective date of this rule.

List of Subjects in 31 CFR Part 215

    State and local tax withholding, Federal employees.

Table of Contents, Authority and Issuance

0
For the reasons set forth in the preamble, 31 CFR part 215 is amended 
as follows:

PART 215--WITHHOLDING OF DISTRICT OF COLUMBIA, STATE, CITY AND 
COUNTY INCOME OR EMPLOYMENT TAXES BY FEDERAL AGENCIES

0
1. The table of contents for part 215 is revised to read as follows:

    Authority: 5 U.S.C. 5516, 5517, 5520; E.O. 11997, 42 FR 31759.

0
2. Revise Sec.  215.1 to read as follows:


Sec.  215.1  Scope of part.

    This part relates to agreements between the Secretary of the 
Treasury and States (including the District of Columbia), cities or 
counties for withholding of State, city or county income or employment 
taxes from the compensation of civilian Federal employees, and for the 
withholding of State income taxes from the compensation of members of 
the Armed Forces. Subpart A contains general information and 
definitions. Subpart B prescribes the procedures to be followed in 
entering into an agreement for the withholding of State, city or county 
income or employment taxes. Subpart C is the Withholding Agreement 
which the Secretary will enter into with any State, city or county 
which qualifies to have the tax withheld.

0
3. Amend Sec.  215.2 to revise paragraphs (h)(2)(i), (l), and (m) to 
read as follows:


Sec.  215.2  Definitions.

* * * * *
    (h) * * *
    (2) * * *
    (i) Members of the Armed Forces means (1) individuals in active 
duty status (as defined in 10 U.S.C. 101(d)(1)) in regular and reserve 
components of the Army, Navy, Air Force, Marine Corps, and Coast Guard, 
and (2) members of the National Guard while participating in exercises 
or performing duty under 32 U.S.C. 502 and members of the Ready Reserve 
while participating in scheduled drills or training periods or serving 
on active duty for training under 10 U.S.C. 10147.
* * * * *
    (l) Secretary means Secretary of the Treasury or his designee.
    (m) State means a State, territory, possession, or commonwealth of 
the United States, or the District of Columbia.
* * * * *

0
4. Revise Sec.  215.3 to read as follows:


Sec.  215.3  Procedures for entering into a Withholding Agreement.

    (a) Subpart C of this part is the Withholding Agreement which the 
Secretary will enter into with a State, city or county. A State, city 
or county which does not have an existing withholding agreement with 
the Secretary and wishes to enter into such an agreement shall indicate 
in a letter its consent to be bound by the provisions of Subpart C. The 
letter shall be sent to the Secretary by addressing the request to: 
Assistant Commissioner, Federal Finance, Financial Management Service, 
Department of the Treasury, 401 14th Street, SW., Washington, DC 20227. 
The letter shall be signed by an officer authorized to bind 
contractually the State, city or county. Copies of all applicable State 
laws, city or county ordinances and implementing regulations, 
instructions, and forms shall be enclosed. The letter shall also 
indicate the title and address of the official whom Federal agencies 
may contact to obtain forms and other information necessary to 
implement withholding.
    (b) Within 120 days of the receipt of the letter from the State, 
city or county official, the Secretary will, by letter, notify the 
State, city or county:
    (1) That a Withholding Agreement has been entered into as of the 
date of the Secretary's letter, or
    (2) That a Withholding Agreement cannot be entered into with the 
State, city or county and the reason for that determination.
    (c) The withholding of the State, city or county income or 
employment tax shall commence within 90 days after the effective date 
of the agreement.

0
5. Revise Sec.  215.4 to read as follows:


Sec.  215.4  Relationship of Withholding Agreement to prior agreements.

    Jurisdictions which requested from Treasury an agreement other than 
the Withholding Agreement set forth in Subpart C (formerly known as the 
Standard Agreement) within 90 days after July 1, 1977, which request 
Treasury subsequently approved, will continue to be governed by such 
agreement. For all other jurisdictions, the Withholding Agreement set 
forth in Subpart C replaced all prior agreements between the Secretary 
and a taxing jurisdiction for the withholding of income or employment 
taxes from the compensation of Federal employees, and any jurisdiction 
which was a party to a prior agreement is presumed to have consented to 
be bound by the Withholding Agreement set forth in Subpart C.


Sec.  215.5  [Removed]


Sec. Sec.  215.6-215.13  [Redesignated as Sec. Sec.  215.5-215.12]

0
6. Remove Sec.  215.5 and redesignate Sec. Sec.  215.6 through 215.13 
as Sec. Sec.  215.5 through 215.12, respectively.

0
7. Revise the heading for Subpart C to read:

Subpart C--Withholding Agreement

0
8. In newly redesignated Sec.  215.5, remove the words ``Standard 
Agreement'' and add, in their place, the words ``Withholding 
Agreement''.

    Dated: January 4, 2006.
Richard L. Gregg,
Commissioner.
[FR Doc. 06-238 Filed 1-12-06; 8:45 am]
BILLING CODE 4810-35-P