SECTION 2. BACKGROUND

.01 If an employer provides an employee with a vehicle that is available to the employee for personal use, the value of the personal use must generally be included in the employee’s income and wages. Internal Revenue Code § 61; Treas. Reg. § 1.61–21.

and 5 C.F.R. § 550.403(c) if the employees and their dependents “are evacuated in the United States because of natural disasters or for military or other reasons that create imminent danger to their lives.” 5 C.F.R. § 550.401(a). The payments authorized by 5 C.F.R. § 550.403(c) include travel expenses and per diem payments to offset direct added expenses the employees and their dependents incur due to an evacuation. Additional special allowance payments for subsistence expenses, as authorized by and computed under 5 C.F.R. § 550.405(b)(2), may be paid for a period not to exceed 180 days after the effective date of the order to evacuate. Federal executive agencies generally must determine the amount of the special allowance payments for the employees and their dependents consistent with the Federal Travel Regulation (FTR), 41 C.F.R. Chapters 300 through 304. For dependents under 12 years of age and for payments made after the first 30 days of evacuation, the special allowance payments are paid at a rate less than the maximum per diem . 5 C.F.R. § 550.405. The regulations authorizing these payments are silent as to whether federal executive agencies are required to take into account reimbursements from other payors when determining the amount of a special allowance.

Section 61 provides that except as otherwise provided in subtitle A of the Code, gross income means all income from whatever source derived.

The Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107–134, 115 Stat. 2427 (2001), added § 139 to the Code. Section 139(a) provides that gross income shall not include any amount received by an individual as a qualified disaster relief payment.

Under § 139(b)(1), a qualified disaster relief payment includes any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster, but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.

Section 139(c) defines a qualified disaster to include:

(1) a disaster that results from a terroristic or military action (as defined in § 692(c)(2));

(2) a Presidentially declared disaster (as defined in § 1033(h)(3)); or

(3) a disaster resulting from an accident involving a common carrier, or from any other event, that is determined by the Secretary to be of a catastrophic nature.

Section 139(d) provides that for purposes of chapter 2 and subtitle C of the Code, a qualified disaster relief payment shall not be treated as net earnings from self-employment, wages, or compensation subject to tax.

Because “of the extraordinary circumstances surrounding a qualified disaster, it is anticipated that individuals will not be required to account for actual expenses in order to qualify for the [§ 139] exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred.” Joint Committee on Taxation Staff, Technical Explanation of the “Victims of Terrorism Tax Relief Act of 2001,” As Passed by the House and Senate on December 20, 2001, 107 ^th Cong., 1 ^st Sess. 16 (2001).