Part 5, Chapter 13: Manual Exhibit B
Exclusion from Gross Income for Federal Income Tax Purposes
Quarters Rental Paid by Employees Required to Occupy Government Quarters
When the Service Unit Chief Executive Officer determines that all of the following conditions have been met, quarters deductions (with the exception of separately billed utility charges) may be excluded from gross income by the employee for income tax purposes in accordance with Income Tax Regulations, Section 1, 119-(1) (b) (amended July 8, 1964 by Treasury Decision 6745):
- That lodging is furnished on the business premises of the employer, at the place of employment.
- That lodging is furnished for the convenience of the employer. The primary consideration is that such lodging facilities are necessary to permit the employee to do his job properly.
- That the employee is required to accept such lodging as a condition of his employment. The condition need not be contractual, but must be necessary for proper performance of the employee's job (e.g., employee on 24-hour call, or where no other quarters are available).
- The amount of Quarters rental excluded from gross income by the employee is for final determination by the Internal Revenue Service.
In order to assist the employee claiming such a deduction when filing his or her Federal Income Tax Return, Service Unit Chief Executive Officer shall, upon request, furnish affected employees with a determination attesting to the facts in this section. This determination shall be provided in the manner indicated in the sample below:
This is to certify that [Name of Quarters Tenant]____________________ was required to occupy Government quarters from [Occupancy Start Date]__________ to [Occupancy End Date]__________ while employed at [Name of Facility's Location]______________________ which are on business premises of the Federal Government. Occupancy of the quarters was required as a convenience to the Government, because no other suitable facilities are available, and the employee could not otherwise satisfactorily perform the services required of him or her. The aforementioned employee was required to accept lodging as a condition of his employment.
Signature of Service Unit Chief Executive Officer Date