November 7, 1973 Bureau of Reclamation, reducing the amount of certain allowable items in a claim for relocation assistance benefits in connection with the acquisition by the United States of Tracts Nos. 4-5-317, 3-20-417 and 2-28-417, Mountain Park Project, Oklahoma. Affirmed in part and modified in part. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970: Uniform Relocation Assistance: Moving and Related Expenses: Moving Expense Allowance Where qualified persons displaced from their dwelling elect to receive a moving expense allowance under subsection 202 (b) of the Act, the payment is properly based on the schedule established for such purpose by the Bureau head in accordance with moving allowance schedules maintained by the State highway department of the State in which the displacement occurs. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970: Uniform Relocation Assistance: Moving and Related Expenses: Payments in Lieu of Moving and Related Expenses: Fixed Payment: Taking of Farm Operation In computing average annual net earnings of a farm operation for purposes of determining the amount of the fixed relocation payment to which the claimants are entitled under subsection 202 (c) of the Act, by reason of displacement from their farm operation, the utilization by the Bureau of a four-year period which is more equitable for establishing such earnings than the two-year period which would otherwise be applicable, will be upheld as a reasonable exercise of the discretionary authority delegated to the Bureau for such purpose under pertinent Departmental regulation. In computing average annual net earnings of a farm operation for purposes of determining the amount of the fixed relocation payment to which the claimants are entitled under subsection 202 (c) of the Act, charges for use of the lands on a rental basis may not be deducted from net earnings which are reported and recognized for income tax purposes of the owner of the farm operation. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970: Uniform Relocation Assistance: Replacement Housing Homeowners for Where it appears that the replacement housing payment authorized by the Bureau under subsection 203 (a) (1) (A) of the Act represents an amount which, when added to the acquisition cost of the dwelling acquired, meets the reasonable cost of the comparable replacement dwelling which is decent, safe and sanitary, and adequate to accommodate the displaced persons, the Bureau determination will be affirmed. In determining such amount, it is proper to add to the total appraisal of the acquired dwelling, the proportionate amount of the total acquisition costs in excess of appraised valuation of the acquired property which is allocable to the acquisition cost of the acquired dwelling. APPEARANCES: Earl C. May, pro se; Z. P. Sheldon, Acting Field Solicitor of the U.S. Department of the Interior, Amarillo, Texas, for the Bureau of Reclamation. OPINION BY MS. PATTON OFFICE OF HEARINGS AND APPEALS Earl C. May has appealed from a determination dated April 25, 1973, by the Regional Director, Southwest Region of the Bureau of Reclamation, which reduced the amount of certain allowable items in his claim, submitted February 9, 1973, for himself and in behalf of his wife, Mary C. May, for relocation assistance benefits under sections 202 and 203 (a) of Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. §§ 4622 and 4623 (1970), in connection with the acquisition by the United States on July 5, 1972, of Tracts Nos. 4-5317, 3-20-417 and 2-28-417, Mountain Park Project, Oklahoma. The items of the claim and the amounts approved by the Bureau are shown below: (1) Moving and related expenses in the sum of $500, representing a moving expense allowance of $300 and a dislocation allowance of $200, claimed by the Mays under subsection 202(b) of the Act, by reason of displacement from their dwelling, in lieu of payment of actual moving and related expenses authorized by subsection 202 (a) of the Act. The Bureau determined that the allowable in lieu payment was $425, comprised of $225 for moving costs pursuant to Oklahoma's moving schedule for a sixroom house, as provided by the Federal Highway Administration, plus the claimed $200 dislocation allowance. (2) A fixed payment of the sum of $10,000, the maximum allowable under subsection 202 (c) of the Act in lieu of actual moving and related expenses because of displacement from their farm operation, claimed by the Mays upon the basis of their computation of average annual net earnings of the farm operation in such amount, before income taxes, during the taxable years 1971 and 1972. The Bureau found that the allowable in lieu payment was $4,351.55, the average annual net earnings of the farm operation during the period 1969 through 1972 as computed by the Bureau, the said period having been determined by the Bureau to be more equitable for establishing such earnings than the period 1970-1971, the two taxable years immediately preceding the taxable year in which the farm operation moved from the real property acquired for the project, as provided in subsection 202 (c) of the Act. (3) Replacement housing costs totalling $4,629, claimed by the Mays under subsection 203 (a) of the Act, as qualified homeowners displaced from their dwelling, $4,550 of which represents the difference between an estimated $7,750 cost of the dwelling and garage on the real estate acquired by the Government and an estimated $12,300 cost of the replacement dwelling, and the balance of $79 representing expenses incurred in closing costs incident to the purchase of the replacement dwelling. The Bureau determined that the total allowable replacement housing costs were $2,982, made up of a housing differential of $2,903 (the difference between the $11,850 allowance for the replacement dwelling and the $8,947 cost of the dwelling acquired by the Government) and the claimed $79 in closing costs. Thus, the Mays' claim for reimbursement for moving and related expenses and for replacement housing costs, in the amount of $15,129, was reduced by the Bureau to $7,758.55. A hearing on the appeal was held on July 25, 1973, in Amarillo, Texas, before Administrative Law Judge William J. Truswell. At the outset of the hearing the Bureau. added to the amount approved for payment under item (2) above the November 7, 1973 sum of $356.19 for real property taxes paid by Mr. May, bringing the total in lieu payment allowed for this item, in accordance with the Bureau computation, to $4,707.74 and the entire amount allowed under the relocation assistance benefits claim to $8,114.74. The record shows that the Bureau of Reclamation acquired the abovedescribed tracts comprising the May farm property, situated in Kiowa County, Oklahoma, as well as the improvements thereon, including the six-room dwelling owned and occupied by the Mays, on July 5, 1972. The purchase price was $120,000. The property had been appraised by the Bureau at $114,000. Under the terms of the land purchase contract the Mays retained the right to possession of the property until December 31, 1972, and the right to salvage all improvements, including the dwelling, at the appraised salvage value of $1,400, such sum to be deducted from the purchase price. The contract terms provided also for the Mays' harvesting and retention of crops on the acquired lands, except for a portion required for relocating a railroad, until December 31, 1972. The Mays moved from their farm home into their replacement dwelling in Hobart, Oklahoma, on December 7, 1972. On January 29, 1973, a lease agreement for agricultural and grazing purposes was entered into between the parties, involving 246 acres of the lands, for the period January 1, 1973, through Decem ber 31, 1973, with a right of renewal for one year at the option of the lessee, at a rental of $1,204 annually. With respect to the reduction of his claim for moving expense allowance, item (1) above, the appellant contends, in effect, that he should be entitled to the maximum moving allowance of $300, authorized by subsection 202 (b) of the Act, because he did the moving himself at a cost less than that of the informal estimate of a commercial mover and he thereby effected a saving for the Government. The contention is not valid since the law affords no such alternative as proposed by the appellant. He was entitled under subsection 202 (a) (1) to the actual, reasonable moving expenses for relocating his family in the replacement dwelling or, under subsection 202 (b), to a payment in lieu thereof, made up of a dislocation allowance of $200 plus moving expenses determined according to a schedule established by the head of the Federal agency, not in excess of $300. Departmental regulations issued February 9, 1973 (41 CFR Part 114-50, 38 F.R. 39653980),1 in effect at the time of submission of the appellant's claim, and which were promulgated in accordance with guidelines of the Office of Management and Budget,2 provide in § 114-50.701-1 that moving allowance schedules maintained by 1 These regulations were amended on March 16, 1973 (38 F.R. 7116) and on September 10, 1973 (38 F.R. 24649-24650) without change material hereto. 2 Circular No. A-103, issued May 1, 1972. the respective State highway departments should be used as the basis for the schedules of the Bureau or Office concerned. At the hearing the Bureau of Reclamation established that it follows the Federal Highway Administration schedule of moving expense allowances published in the Federal Register on September 30, 1971 (36 F.R. 19163), which schedule is based on moving allowance schedules of each State, Puerto Rico and the District of Columbia. The allowance therein set forth for moving six rooms of furniture in Oklahoma is $225. Accordingly, the in lieu payment was properly determined by the Bureau as $425. As to item (2) above, concerning the proper in lieu payment under subsection 202 (c) of the Act for displacement from the farm operation, the cited provision of the Act, § 4.6 of the aforementioned guidelines of the Office of Management and Budget, and the Department's implementing regulation in § 114-50.702 authorize a fixed payment in an amount equal to the average annual net earnings of the farm operation but not less than $2,500 nor more than $10,000. The term "average annual net earnings" for purposes of subsection 202(c), §§ 4.5 and 4.6 of the OMB guidelines, and Departmental regulation § 114-50.705 in which it is defined, means the average annual net earnings of the farm operation, before Federal, State, and local income taxes, during the two taxable years immediately preceding the taxable year in which such farm operation moves from the real property acquired, or during such other period as the displacing agency determines to be more equitable for establishing such earnings, and includes any compensation paid by the farm operation to the owner, his spouse, or his dependents during such period. Record information in copies of the Mays' Federal income tax returns for the years 1970 and 1971 (the two years immediately preceding the year 1972, in which the Bureau acquired title to the real property and the Mays moved therefrom to their replacement dwelling) shows net earnings of the farm operation of $2,322.12 for the taxable year 1970 and of $4,701.31 for the taxable year 1971. The Bureau, recognizing that 1970 was a dry year and, therefore, not representative. determined it would be inequitable to use only the years 1970 and 1971 for determining the average annual net earnings of the farm operation. Therefore, and in order that the Mays might have the benefit of the high 1972 net earnings of $14,291.12 included in the computation, the Bureau prescribed the four-year period 1969-1972 as proper for establishing the average annual net earnings of the farm operation, thus including one year prior and one year subsequent to the two-year period which would otherwise have been applicable. The Bureau added to the figure shown on the tax return as net earnings for 1972 the $1,204 rental paid in 1972 for the lease year 1973, such item having for determining the November 7, 1973 previously been deducted as an expense of operating the farm in 1972. The Bureau then deducted from the average annual net earnings figure of $6,453.55 thus arrived at, a charge denoted as a "return to capital land investment" which approximates rental costs for use of the land for the years 1969 through 1972, computed upon the same basis as that used in determining the rental in the lease of the farm lands, namely $6 an acre annually for croplands and $4 an acre annually for pasturelands. The net earnings for each of the years mentioned were thus reduced by $2,102, resulting in the average annual net earnings figure of $4,351.55 determined by the Bureau as proper for purposes of the in lieu payment. The appellant, apparently in agreement that the years 1970-1971 should not be used for computation of the average annual net earnings, urges that the period for computing such earnings should be the taxable years 1971 and 1972. He avers in this connection that the 1972 crop year did not end until December 31, 1972, and that, under the contract of sale, he had full possession of the farm operation to that date. He also asserts that he continued farming and retained all farm equipment, cattle, implements and facilities to farm until December 7, 1972, when he held a farm sale of these items. He claims that $10,867.60 represents one-half of the net earnings of the farm operation during the period 1971-1972, based upon net 528-755-74- -2 earnings of $4,701.31 in 1971 and $14.291.12 in 1972.3 Further, the appellant challenges the Bureau's action in deducting from net earnings shown by him in his Federal income tax returns for 1969 through 1972, the charges it assigned for use of the lands equivalent to the rental charges the parties agreed to under the agricultural and grazing lease for 1973. From the evidence presented it is our view that the Bureau's determination to utilize the four-year period 1969-1972 for computing average annual net earnings of the farm operation was in fact more equitable for establishing representative annual net earnings in the circumstances of this case than the period 1970-1971 which would otherwise have been applicable, and that the time period prescribed was clearly warranted. We, therefore, find that such action was a reasonable exercise of the discretionary authority delegated to the Bureau under the pertinent Departmental regulations for this purpose. On the issue of the proper computation of average annual net earnings of the farm operation, however, the Bureau erred in deducting from the net earnings, as reported in the Federal income tax returns, charges for use of the lands 3 Including within total earnings in 1972 the sum of $1,204, representing the lease rental for 1973, a charge paid in 1972, it would appear that one-half of the total net earnings for the years 1971-1972 would be $10,098.21 rather than $10,867.60 as claimed by the appellant. |