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USAREUR Credit Union Liaison Update Defense Credit Union Council Overseas Sub‐Council Brief

CPT Juan C. Pratts USAREUR Banking and Credit Union Liaison Officer

1 May 2014 Rome, Italy

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Provide an update of ongoing developments in the U.S. Army (USAREUR) Area of Operations (AO) and Area of Responsibility (AOR). Purpose

. 266th Financial Management Support Center Update ‐Mission ‐USAREUR & USARAF Support

. USAREUR Transformation ‐Installation Closure ‐Manpower Reduction Agenda

. Topics of Interest/Concern ‐Advertisement of Off‐Base Financial Institutions ‐Art. X NATO SOFA Issue for Art. 72 SA Employees

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 2 UNCLASSIFIED//FOUO// 266th Financial Management Support Center Update

. 266th FMSC deployed to Camp Arifjan, Kuwait . COL. Thomas J. Seelig ‐ Director . SGM Tommy A. Byrd –Senior FM Advisor

. In Support of Operation Enduring Freedom (OEF); 1st Theater Support Command (TSC)

. Contingency Banking team deployed to Kabul, Afghanistan . 1LT Aaron Dermon ‐ OIC . SFC Steven J. Brooks ‐ NCOIC

. Civilian Deputy Director . Mr. Mark W. Jackson

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Benelux Finance Office Italy Finance Office USARAF Area of Responsibility ‐Mauritania ‐Uganda ‐Senegal ‐Sudan ‐Mali ‐South Sudan ‐Burkina ‐Djibouti ‐Faso ‐Egypt ‐Niger ‐Lesotho ‐Chad ‐Kenya ‐Central African Republic

Germany Africa USAREUR Area of Responsibility ‐Romania ‐Slovakia ‐Poland ‐Hungary ‐Norway ‐Ukraine ‐Croatia ‐ Lithuania ‐Latvia ‐Estonia ‐Kosovo

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 4 UNCLASSIFIED//FOUO// US Army Europe Transformation

. FY06‐13 = 7 Garrisons / 112 Sites Closed

. 28,912 Acres, $11.21B Plant Replacement Value (PRV)

. FY14‐15 Returns = 2 Garrisons / 21 Sites

. 16,045 Acres, $6.854B Plant Replacement Value (PRV)

. USAG Bamberg & USAG Schweinfurt Closure (September 2014)

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2006 Returns - 7 Sites 2007 Returns - 29 Sites 2008 Returns - 26 Sites 2009 Returns - 20 Sites 2010 Returns - 8 Sites -211 Acres / PRV: $0.36B -2,986 Acres / PRV: $2.48B -11,305 Acres / PRV: $2.53B -7,816 Acres PRV: $2.72B -Acres: 608 PRV: $0.510 . Oberdachstetten Fam Hsg . Schwanberg DCS Site . W.O. Darby Kaserne . Bensheim Maint & Supply Fac . Sanem Site (LUX) . Daley Village Fam Hsg . Aschaffenburg Fam Hsg . Ernst Ludwig Kaserne . Hutier Kaserne . Anderson Barracks . Wuerzburg Trng Area . Giebelstadt Army Airfield . Cardwell Village Fam Hsg . New Argonner Fam Hsg . Dexheim Family Housing . Breitsol Comms Station . Giebelstadt DYA Camp . Buedingen Ammo Area . Grossauheim Kaserne . Coltano Comms Site (IT) . Eygelshoven Reserve Stor Area (NL) . Giebelstadt Tactical Defense Fac . Buedingen Army Heliport . Wolfgang Kaserne . Germersheim RTO site . RAF Hythe (UK) . Kitzingen Fam Hsg . Coleman Village Fam Hsg . Pioneer Village Fam Hsg . Neubruecke Hospital . Bettembourg Site (LUX) . Amberg Fam Hsg . Tiergarten Training Area . AG Pub & Trng Aids Ctr . Friedrichsfeld Storage Area . Pond Barracks . Fliegerhorst Airfield Kaserne . Pioneer Kaserne . Stem Kaserne Pre-IMCOM Returns by USAREUR . Brandhof Radio Relay . Wuerzburg Hospital . Kitzingen Trng Areas 2003-2005 (12) . HoheWarte LTA . Ray Barracks . Aschaffenburg Trng Areas 12 Sites, 412 Acres, PRV$.819B . Larson Barracks . Roman Way Village Fam Hsg . Camp Oppenheim Trng Area (Not included in above totals) . Harvey Barracks . Giessen Community Facilities . Idar Oberstein Fam Hsg • Regensburg Fam Housing . Birkenfeld Housing Facilities . Edingen Radio Receiver Fac . Griesheim Airfield • Rheinau Coal Point D1 . Friolzheim Comms Fac . John F Dulles Village Fam Hsg . Strassburg Kaserne • Massbach QRS Site . Gruenstadt Comms Fac . George Marshall Vill AFH . Lincoln Village Fam Hsg • Brunssum Pomms (NL) . Bonstetten Radio Relay Station . Armstrong Village Fam Hsg . Leighton Barracks • Vriezenveen Pomms (Almelo) (NL) . Babenhausen Kaserne . Armstrong Barracks . Jefferson Village Fam Hsg • Bad Aibling Kaserne . Babenhausen Fam Hsg . Pendleton Barracks . Kelley Barracks • Community Fac Kaiserslautern . Hohenstadt Radio Relay Station . Messel Small Arms Range . Dautphe Boy Scout Camp • George Gershwin Fam Hsg . Melibokus Radio Relay Station . Campo Pond Training Area . Hommertshausen Girl Scout Camp • Verona Riverside School (Italy) . General Patton Hotel . Langen Terrace Fam Hsg Area • General Von Steuben Hotel . Koenigstuhl Radio Relay Station . St. Barbara Village Fam Hsg • AFN Station . Heidenheim Radio Relay Site . Argonner Kaserne • Schloss Kaserne . Reinwarzhofen Radio Relay Site . Yorkhof Kaserne AFRC Site not included above . Stocksberg Comm Station . Butzbach Trng Area & Range • Chiemgau Recreation Area . Alvin York Vil Fam Hsg . Friedberg Trng & Stor Area . McArthur Place Fam Hsg . Faulenberg Kaserne Franconia . Turley Barracks Giessen Hanau Darmstadt 2011 Returns - 6 Sites Total 2012 Returns - 6 Sites 2013 Returns - 10 Sites FY14-15 Returns = 2 Garrisons / 21 Sites* -298 Acres // PRV - $0.512B -612 Acres // PRV - $.158B -5,076 Acres // PRV - $1.94B . Class III site . Dannenfels Comms Station (Nov 11) . Lampertheim Tng Area (15 Jan 13) (16,045 Acres, $6.854B PRV) . Friedrichsfeld QM Service Center . Dexheim Missile facility (Jan 12) . Rottrdm Adm Lease (31 Jan 13) (NL) . Cambrai Fritsch Kaserne . Kilbourne Kaserne (May 12) . Schwetzingen TA (27 Feb 13) 2014 Future Returns - 10 Sites 2015 Future Returns - 11 Sites . Hammonds Barracks . Bamberg Airfield (Jun 12) . Tompkins Barracks (28 Feb 13) -759 Acres // PRV - $2.87B -15,286 Acres // PRV - $3.984B . Taylor Barracks . Rottershausen Stor Area (Sep 12) . Ben Franklin Fam Hsg (30 Apr 13) . Campbell Barracks . Coleman Barracks . Nathan Hale QM Area . Sulzheim TA (Sep 12) . Sullivan Barracks (29 May 13) . Heidelberg Army Air Field . Funari Barracks (+ Acquired Brunssum NIC Site Jun 12) . Edigheim Beacon Site (14 Jun 13) . Heidelberg Community Spt Ctr . Darmstadt Training Center (Dagger) . Heidelberg Hospital (17 Sep 13) . Mark Twain Village Fam Hsg . Bamberg Stor & Range . Heidelberg Golf Course (30 Sep 13) . Patrick Henry Village . Flynn AFH & TNG Area . Oftersheim Range (30 Sep 13) . Patton Barracks . Warner Bks . Spinelli Barracks . Warner AFH Mannheim Baden-Wurttemberg . American Arms Hotel . Askren Manor AFH . Giessen Army Depot (Complete) . Conn Bks (Note: Return Data updated as of 30 SEP 2013) . San Gottardo Signal Site (Italy) . Ledward Bks Bamberg . Schweinfurt TA FY06-13 = 7 Garrisons / 112 Sites Closed, (28,912 Acres, $11.21B PRV) Schweinfurt POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 6 UNCLASSIFIED//FOUO// • US Army Europe Transformation

Manpower Reduction

.USAREUR HQ –40 % Reduction FY14

.21st TSC HQ –25 % Reduction FY15

“Right now the Army and USAREUR are in a time of transformation as we seek to reach our authorized end strength to meet the needs of the nation. As we transform, we must ensure that our actions enable us to build readiness and continue modernization for the future.” ‐ LTG Donald M. Campbell, USAREUR CDR

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Germany

.Gain ‐ 53 U.S. CIV .Gain –5 U.S. CIV and 3 MIL

.Loss – 554 LN and 93 MIL .Loss ‐ 25 LN

Netherlands Overall

.Gain ‐ 1 MIL .Net Increase ‐ 44 U.S. CIV

.Loss ‐ 14 U.S. CIV .Net Reduction – 579 LN and 89 MIL

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Kaiserslautern, Germany Vilseck, Germany

.6966th Truck Transportation Terminal: .Maintenance Activity Vilseck: Loss –1 U.S. Loss –3 U.S. CIV and 63 LN. CIV and 42 LN. .Maintenance Activity Kaiserslautern: Gain –1 U.S. CIV. Loss – 330 LN. .Supply Activity Europe: Loss –1 U.S. CIV and 42 LN.

Grafenwoehr, Germany “The expected decrease in future workload requirements in conjunction with the posture .Joint Multinational Training Command changes announced by DoD in 2012 make (JMTC): Loss –9 U.S. CIV, 114 LN and 83 MIL. these changes necessary”.

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 9 UNCLASSIFIED//FOUO// US Army Europe Transformation (IMCOM‐E)

Germany .USAG Bavaria: Gain –19 U.S. CIV. Loss –72 LN and 2 MIL. .Garrison Support Sembach: Gain –3 U.S. CIV .USAG Hohenfels: Loss –8 U.S. CIV, 59 LN and 3 and 4 LN. MIL. .USAG Ansbach: Gain ‐ 6 U.S. CIV. Loss –1 MIL .USAG Rheinland‐Pfalz: Gain –21 U.S. CIV, 179 LN and 20 LN. and 3 MIL. .USAG Baumholder: Loss –11 U.S. CIV, 154 LN .USAG : Gain –2 U.S. CIV, 91 LN and 2 and 8 MIL. MIL. .Small Site Garmisch: Gain –14 LN and 1 MIL. .USAG Wiesbaden: Gain –38 U.S. CIV and 32 LN. Loss –4 U.S. CIV. Loss –2 MIL.

Belgium

.USAG Benelux: Loss –30 LN and 2 MIL. .Small Site Schinnen: Gain ‐ 1 MIL. Loss ‐ 14 U.S. CIV. .Small Site Brussels: Gain –5 U.S. CIV, 5 LN and 5 MIL.

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 10 UNCLASSIFIED//FOUO// Advertisement of Off‐Base Financial Institutions

Issue: Allegations of improper advertisement from the Exchange New Car Sales (ENCS) on behalf of off‐base financial institutions (FI).

DoDFMR Vol. 5 Ch. 34: “Off‐base financial institutions are not permitted to distribute competitive literature or forms on the installation”

“Installation activities, including Military Exchange Services and concessionaire outlets, shall not permit the distribution of literature from off‐base financial institutions if there is an on‐base financial institution”

Status: DoD Banking Office has established a dialogue with AAFES at senior levels.

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Art. X NATO SOFA Taxation Issues for Art.72 SA Employees Joerg C. Moddelmog, LL.M. (USA) Senior German Attorney‐Advisor

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Non‐German Commercial Enterprises (Art. 72 SA)

. Are not part of the U.S. Forces, but if the enterprise EXCLUSIVELY serves the Forces, the civilian component, & their dependents, both the enterprise and its U.S. employees get certain SOFA based benefits/privileges. . Employees who EXCLUSIVELY serve the enterprise are treated as members of civilian component with SOFA status, except: . Art. 72 para. 5 (b) SA  Germans or person who were ordinary resident in Germany PRIOR to being hired don’t qualify for SOFA status

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The Tax Benefit: Art. X para. 1 NATO SOFA

. Among the SOFA benefits available is exemption for certain German (host nation) taxes (Art. 72 para. 5 (a) SA  Art. X para. 1, NATO SOFA (taxation privilege)

. Article X paragraph 1 NATO SOFA reads: “Where the legal incidence of any form of taxation in the receiving State depends upon residence or domicile, periods during which a member of a force or civilian component is in the territory of that state BY REASON SOLELY of his being a member of such force or civilian component shall not be considered as periods of residence therein, or as creating a change of residence or domicile, for the purposes of such taxation. Members of a force or civilian component shall be exempt from taxation in the receiving State on the salary and emoluments paid to them as such members….”

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 14 UNCLASSIFIED//FOUO// Art. X NATO SOFA Taxation Issues for Art.72 SA Employees

Art. X para. 1 NATO SOFA . The German tax courts currently interpret the wording “by reason solely of” in Art. X to mean, to have the “intent to return” (to the US).

. The “Intent to Return” (or “Rückkehrwille”) test applies to uniformed members of the force and to members of the civilian component, and thus to Art. 72 employees.

. “Intent to Return” must exist during EVERY tax year, not just at the end of the contract.

. FULL burden of proof is on the “taxpayer” . merely presenting an alternative view of the facts is insufficient. (“Is the glass half full or half empty?”) . Problem: It’s a subjective standard and when in doubt, the Finance Office

POC Name wins (99% of the time). Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 15 UNCLASSIFIED//FOUO// Art. X NATO SOFA Taxation Issues for Art.72 SA Employees

“Intent to Return” Some of the Criteria The Courts Consider: . overall duration of stay in Germany (“5‐year rule”) . real estate in the USA as opposed to real estate in Germany . (valid) American driver’s license . driving a car with US specifications . if you paid U.S. State income tax. . frequently traveling back to the USA . participation in U.S. elections (remaining ties to the USA) . German spouse (and the amount of German spouse’s income) . Kindergeld, attendance of German school; homeowner grants. . Witness testimony of neighbors and friends on your German (dis)likes . Case‐by‐case analysis, there is no one decisive factor ‐‐ Even an actual later return to the U.S. has been held to be inconclusive.

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 16 UNCLASSIFIED//FOUO// Art. X NATO SOFA Taxation Issues for Art.72 SA Employees

New / Latest Trick

Foreign Earned Income (FEI) and German Taxation . Germans see taking the FEI exemption as an indication to opt for a . German residence, triggering a lack of “intent to return” . Germans “interpret” US tax law –incorrectly(?) ‐ When using the FEI exemption, select the Physical Presence election. . Art. 72 para. 5 (a) SA misses a clause like Art. 71 para. 5 (a) (i) SA

Foreign Earned Income (FEI) and US Taxation . Rev. Rul. 72‐497, 1972‐2 C.B. 448, 1972 WL 29556 (IRS RRU) . “Indirect” government employee: “SOFA‐Land” means that Germany is not your residence for FEI or else taxation should be in Germany  USAREUR US tax attorneys still work this issue

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 17 UNCLASSIFIED//FOUO// Art. X NATO SOFA Taxation Issues for Art.72 SA Employees

What Happens if German Tax Authorities Determine “No Intent to Return”

. Generally, SOFA status remains unaffected, except Art. X tax exemption shield is gone. . World‐wide income subject to unlimited German taxation. . Risk of in kind income (e.g., VAT‐free shopping, gas‐coupons,…) being added to gross income.

. US/German Tax Treaty (TT) applies but provides no relief: . Art. 19 TT: Government Services does not apply to SCU employees. . Art. 15 TT: Personal Services: . Right of taxation rests with residency state (Germany) . Work is performed in Germany

POC Name Enter DSN UNCLASSIFIED//FOUO// As of: YYYY MM DD FIRST IN SUPPORT –READY STRONG! 18 UNCLASSIFIED//FOUO// Art. X NATO SOFA Taxation Issues for Art.72 SA Employees

What to do?

. If eligible, see a JAG local national legal assistance attorney for initial advice. . Attack settled case law on the interpretation of Art X. para. 1, sentences one and two. . Try new case law – Supplementary Agreement Re: Art. 68 para. 2 (a) – similar language to Art X.

. Keep and document extensive ties with the U.S. to show your “intent to return;” do not mark Bona Fide Resident on the IRS Form 2555 (FEI); do not accept German social benefits, especially if tied to residence.

. Last resort: inter‐governmental talks

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Questions?

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