Need Help with official guidance for use CZTE-area leave

Once again, the Personnel Support Detachment took out taxes on my leave earned in a combat zone tax exclusion area. (See my post in http://www.ar15.com/forums/t_1_77/1188987_Selling_leave_question.html .)

DFAS has acknowledged that the taxing of the leave was improper, and is going to give me back pay for the taxes taken out. However, many of the Navy reservists from our rotation have scattered after demobilizing, and I want the PSD to correct this versus trying to contact all of the reservists and have them call DFAS.

I have been googling for hours, and cannot find anything that clearly states that CZTE leave used (not sold back) shall NOT be taxed. I know it sounds redundant ("combat zone tax exempt leave is....um....tax exempt"), but the civilian pay technicians at the PSD insist that the leave is taxable since it was taken CONUS. Their contention is that is would only be non-taxable if sold back or TAKEN WHILE IN THE CZTE AREA. (Really?)

Do any of you have any references that can help me here? I know many Sailors have been affected by this. We are not talking $50 here, but hundreds of dollars, and in some cases, over a grand in pay incorrectly withheld. I want to make sure this is addressed and that Sailors get their back pay.

THANKS!

It's apparently in the DoD FMR:


DoD Financial Management RegulationVolume 7A, Chapter 44
Table 44-1. Taxability of Items of Military Pay and Allowances

If item is:
1) Basic pay,
then item is:
Not taxable:
for pay earned by an enlisted member or warrant officer (W-1 through W-5) and beginning November 21, 1995, commissioned officers (O-1 and above) amounts up to the highest rate of pay payable to any enlisted member plus the amount of hostile fire/imminent danger pay that is actually payable to the officer for any month combat zone or qualified hazardous duty area tax exclusion applies (notes 2 and 7); or, for any member while in a missing status and authorized tax exclusion under the provisions of subparagraph 440102.A. For periods on or before November 20, 1995 for commissioned officers (O-1 and above), up to $500 per month of such pay is not taxable for any month combat zone tax exclusion applies.

Note 7.Only pay and allowances actually earned during any month in which a combat zone or qualified hazardous duty area designation applies are excludable, even if paid in a later, non-qualifying month. Entitlements earned during any non-qualifying month, but paid in a month the exclusion applies, remain taxable. Accrued leave payments qualify only for that portion of days that were actually earned during a qualifying month.

Also see: http://connecticut.networkofcare.org/library/deplyedfinances.pdf for a description of how the system works (although this is not authoritative).

Thanks for this. I had looked at Chapter 44, as well as Chapter 35, and basically the PSD is interpreting "accrued leave payments" as lump-sum payments, and not the use of terminal leave upon demobilization. I know it is splitting hairs, but that's what we're dealing with.

As an update, I contacted several people at DFAS that helped me the last time this happened. Hopefully they will help us.

I really appreciate the info and the time you spent on this.

No problem, I understand how it is dealing with finance. Getting something in writing from DFAS will probably be the easiest approach.

There's a couple separate sections in the FMR dealing with accrued leave payouts when selling back leave, versus this line which specifically deals with base pay. In my opinion, the key words are in note 7: "pay and allowances actually earned during any month in which a combat zone or qualified hazardous duty area designation applies are excludable, even if paid in a later, non-qualifying month.", which is different than the other clause(s) dealing with bulk leave sell-back.

^ I read that, but did not previously pick up on what it was saying.

The bolded part may be just what I need to counter their contention.

Thanks again!

Can the PSD people contact DFAS and have a one-on-one discussion about it?

Well, I cannot make them do it. The PSD insists they are correct, so I am sure they will not contact DFAS.

However, I sent out an e-mail addressed to the PSD personnel and the DFAS personnel who resolved it. I am hoping the DFAS personnel will 'reply all' and that their e-mail will clarify the policy for the PSD.

Just getting to the right person can be tough. I spoke with five people at DFAS before getting someone to help me research this. They even tried to have me call BUPERS because it was a "leave issue".

Run it up their chain of command...if not, Congressional...that should get their attention. I'm serious, if they are screwing up peoples money, go for the jugular.

Well, I didn't have to go with a Congressional complaint, but I did take a similar route.

Net result - I have a hard copy check in my hand for almost $1,200.

AND, I am following up to make sure that anyone else on our rotation that was affected receives similar results.

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