BP US Domestic Relocation Policy US Based Early Experience Program. Date: January 1, 2013 Version 1.0

Transcription

1 BP US Domestic Relocation Policy US Based Early Experience Program Date: January 1, 2013 Version 1.0

2 1 PURPOSE OF THIS POLICY RELOCATION PROGRAM AND POLICY ADMINISTRATION WHEN TO USE THIS POLICY, APPLICABILITY, AND EFFECTIVE DATE CONTRACTUAL MATTERS RELOCATION COSTS / EXPENSE REIMBURSEMENT RELOCATION ALLOWANCES LUMP SUM MISCELLANEOUS EXPENSE ALLOWANCE COST OF LIVING ALLOWANCE (COLA) HOME MAINTENANCE ASSISTANCE IN THE DEPARTURE LOCATION HOUSEHOLD GOODS SHIPMENT AUTOMOBILES MOVES INTO/OUT OF ALASKA PREPARING OIL/GAS EQUIPMENT THAT SHIPS WITH THE HOUSEHOLD GOODS SELF MOVE HOUSING IN THE NEW LOCATION FINAL MOVE TRAVEL BETWEEN LOCATIONS EXTENDED ASSIGNMENTS COMPLETION OF PROGRAM MOVE BACK TO POINT-OF-ORIGINATION STAY IN CURRENT LOCATION MOVE TO A NEW LOCATION TAX CONSIDERATIONS TAX RATES TAX ASSISTANCE CALCULATIONS TAX ASSISTANCE ON COMPENSATION PAYING AND REPORTING TAX ASSISTANCE RECIPROCITY OTHER ASSUMPTIONS MADE STATE INCOME TAXES WITHHELD THROUGH PAYROLL TAX ADVICE TAX TREATMENT SUMMARY TABLE APPENDIX: COST OF LIVING ALLOWANCE (COLA) Page 2

3 BP US Domestic Policy Summary* US Based Early Experience Program (EEP) Eligibility Lump Sum Miscellaneous Expense Allowance Cost of Living Allowance (COLA) Home Maintenance Assistance Household Goods Shipment Housing in the New Location Final Move Travel Between Location Extended Assignments Must be a regular full-time employee participating in any Early Experience Program whose moves are authorized by the program lead. The employee s assignment must require a change in physical work location that would increase the transferee's current one-way commute by 50 miles or more. Provided to offset expenses associated with: home finding trip, temporary living, travel to report to work, travel to return home to ship household goods and final move meals. Calculation based on whether the transferee s family remains in the current location during the period of assignment. One-time allowance to offset incidental expenses. Equivalent to one week s salary. Financial assistance may be provided if the new work location is deemed to have a higher cost of living than the old work location, with business unit approval. Determined by BP s third party data provider. May be provided monthly on a scaled down basis over a 36-month period, if eligible. If the transferee is a homeowner and his/her home in the departure location remains vacant during the period of assignment, a payment of $100 per month will be provided to assist with home maintenance such as lawn care or pool maintenance. Coordination of packing, shipping and unloading provided by the Relocation Coordinator. Automobiles: BP will pay to ship one (1) car if the move is less than 400 miles; two (2) cars if the distance is over 400 miles and the transferee s family relocates to the assignment location. Self move options available reimbursement for trailer or truck rental available. If the transferee s family remains in the current location during the period of assignment, a self move option is available see policy for details. Renters: Current renters are expected to terminate their lease and pay their own housing costs in the new location. BP will cover any required lease cancellation fees up to three months rent. If the renter s family remains in the current location during the period of assignment, BP will provide a furnished one-bedroom corporate apartment. Homeowners: Transferees are expected to maintain their current mortgages. Transferees will be provided with a furnished one-bedroom corporate apartment in the new location. Reimbursement for coach class airfare, lodging (one night in old and one night in new location). If distance is < 250 miles, mileage reimbursement at current IRS mileage rates, in lieu of airfare, for up to 2 vehicles. If the transferee s family remains in the current location during the period of assignment, BP will provide a $500 monthly payment for personal travel expenses between the two locations. No additional relocation expenses reimbursed. COLA payments, housing, return travel and home maintenance, if applicable, may continue. Upon completion of the program, transferees may move back to the point of origin, stay in the Completion of assignment location or move to another location. Program Assistance is provided accordingly, see policy for details. BP will provide tax assistance for certain taxable payments to assist with the additional federal, Tax Assistance state and local income taxes and FICA. See policy for details. *Please refer to the policy document for complete details on each policy component. Page 3

4 1 Purpose of This Policy This document outlines the provisions that BP transferees may be eligible to receive in respect to a US domestic relocation. It is the intent of this policy to cover specified reasonable costs and professional assistance associated with working temporarily in another location other than the transferee s current home location. The benefits incorporated into this policy are not intended to fit every conceivable individual situation or to be applied on a "keep whole" basis. Additionally, the provisions of this policy are intended to provide fair and appropriate levels of financial and relocation assistance for the disruption caused by a temporary relocation, but not seek to enrich or provide financial reward in line with individual performance/contribution. The BP domestic and international mobility policy framework (the mobility framework) is the parent document of this policy and sets out the governance framework for this and other mobility policies. 1.1 Relocation Program and Policy Administration BP has partnered with a relocation service provider to assist transferees in coordinating their relocation. Upon receiving a relocation authorization from BP, the relocation service provider will assign a dedicated Relocation Coordinator who will be the transferee s primary point of contact throughout the relocation process. The Relocation Coordinator will navigate the transferee through every step, answer any questions and outline the information that the transferee needs to provide during the move process. The relocation service provider will not process the relocation authorization earlier than 60 days prior to the transferee s work start date. 2 When to use this Policy, Applicability, and Effective Date BP provides certain benefits in conjunction with the relocation of employees participating in any US Based Early Experience Program. These programs include, but are not limited to: Challenger Program (excluding international and Alaskan North Slope rotations), Discover Program, Sunrise Program, IST Challenger Program, and BP HR Explorers. Early Experience Programs are generally comprised of two or three assignments which are expected to last a minimum of one year. These assignments could involve relocating to an alternative location. The intent upon completion of an assignment requiring relocation is to return to the point of origin. This policy covers each move in association with the beginning or end of each Early Experience Program rotational assignment that occurs after any initial relocation (e.g. College and Entry Level New Hire Relocation Policy ) that may have occurred at hire. The table below will illustrate the applicable relocation policy to utilize. Benefits vary based on the transferee's current status as a homeowner or renter, and whether or not the family relocates with the transferee or remains in the current location. Page 4

5 New Hire s Residence* at Time of Hire New Hire s Initial Work Location upon hire New Hire s Subsequent Assignment Location Applicable Relocation Policy Houston Houston Houston Not eligible for relocation assistance for either assignment Chicago Houston Houston For initial hire - the College and Entry Level New Hire Relocation Policy should be used. Not eligible for relocation assistance for the subsequent assignment. Houston Houston Anchorage For intial hire, not eligible for relocation assistance. For subsequent assignment, the EEP policy would be used. *Residence is the address the new hire used on their current year tax return. This policy is effective for US domestic relocations authorized on or after January 1, To be eligible for relocation assistance described in this policy, all of the following criteria must be met: The transferee must be relocated at the Company s request. The transferee must be a regular full time transferee participating in any early experience program. The transferee may be a current homeowner or a renter. The relocation must meet the IRS distance and time test: Distance Test: The distance between the former residence and the new work location (as determined by BP) must be 50 miles greater than the distance between the former residence and the former work location. For example: Old home to new job = 60 miles Old home to old job = 8 miles Difference = 52 miles Time Test: The transferee must work at least 39 weeks in the new location during the 12-month period immediately following the relocation. The transferee must complete each provision for which the transferee is eligible as well as submit all expenses within one (1) year of the transferee s work start date or at any earlier date requested by BP or its relocation services provider. Page 5

6 The transferee must move to within a reasonable distance of the new work location. The transferee s strategic performance unit/business unit/function may require that the transferee move within a specified mileage of the work location. One set of relocation benefits will be provided per household. If two or more BP employees are members of the same household and move together, only one package of relocation benefits will be paid. Family members covered under this policy include the transferee s spouse/partner, and any dependent. 2.1 Contractual Matters This policy is not an employment offer, contract or guarantee of continued employment. The transferee s employment with BP is at-will, which means that it is not for any particular period of time, and may be terminated by the transferee or by BP at any time, with or without cause or notice. In addition, this policy may not be construed as a benefit plan, and payments under this policy will not be considered salary for purposes of the benefit or compensation plans. While this program is intended to be ongoing, BP reserves the right to end, suspend or amend its relocation policy in whole or in part, at any time. Further, the Company retains ultimate discretionary authority to interpret the provisions of this policy and to determine eligibility for benefits. There will be no cash payments in lieu of utilization of any relocation components contained in this policy. At its sole discretion, BP may modify the terms paid in any given situation or to any given transferee. The Company s decisions regarding the application and interpretation of this relocation policy are final and binding. 3 Relocation Costs / Expense Reimbursement The Relocation Coordinator will process and audit the transferee s relocation expense reports for those relocation expenses that will be directly reimbursed to the transferee. Payment will be made by BP Payroll. Receipts must be submitted for all expenses (where required) except tips, tolls and expenses paid with funds from the Lump Sum Payment and Miscellaneous Expense Allowance. Relocation expenses are separate and distinct from business expenses and must be submitted to the relocation service provider. Transferees should keep a copy of the submitted expense reports (including the receipts) for their records. Monthly credit card statements may not be used in lieu of original receipts. Expenses other than those expressly included in this policy will not be included in any lump sum payment nor be reimbursed. 4 Relocation Allowances 4.1 Lump Sum The relocation policy includes a lump sum benefit for expenses associated with the home finding trip, temporary living, travel to report to work, travel to return home to ship household goods and final move meals. BP has determined that this lump sum benefit plan is fair to the transferee, eliminates significant administrative time and allows transferees maximum flexibility in managing their relocation. Page 6

7 These funds are the transferee s to spend, as he/she deems necessary for expenses incurred in connection with the relocation. The transferee may retain any portion of these funds not spent. Any shortfall of funds is to be covered by the transferee at his/her expense. Transferees do not need to submit for individual expenses, but should retain receipts for his/her personal records. The lump sum benefit and the Miscellaneous Expense Allowance are typically processed together and paid to the transferee in one payment. Both the lump sum and Miscellaneous Expense Allowance are paid via the relocation service provider through BP payroll. Tax assistance is provided for federal, state, and local income taxes and FICA. Calculation of the lump sum is based on whether the transferee s family remains in the current location during the period of the assignment (unaccompanied assignment) and data provided by Runzheimer International, an independent company that specializes in this area, and may be based on the following parameters as applicable: Family size for home finding trip and final move meals. Four days for home finding trip. Fifteen days for temporary living. Travel for home finding trip; transferee and transferee s family: 1 round trip, coach class airfare, 14-day advance purchase. If move distance is less than 250 miles, mileage is at the current IRS mileage rate, in lieu of airfare. Travel for the report to work trip and the trip to return home to ship goods: transferee only: 1 round trip, coach class airfare, 14-day advance purchase. If move distance is less than 250 miles, mileage is at the current IRS mileage rate, in lieu of airfare. Lodging for home finding and temporary living: transferee and transferee s family: full service hotel. Rental car costs (when applicable) for temporary living and house hunting trip: intermediate class rental car. Number of meals associated with house hunting, temporary living, and final move trip, based on standard business travel meal costs. If the transferee is relocating to Alaska, he/she will have additional incidental expenses due to the need to adapt to a different climate. To help offset some of those expenses, the transferee will be provided with an increased amount calculated by Runzheimer International that will be based on relocating family size. This is intended to help cover costs for such items as: winter clothing, snow tires, winter driving classes, and other aspects of daily life unique to Alaska. 4.2 Miscellaneous Expense Allowance The transferee will be provided with a Miscellaneous Expense Allowance to offset expenses associated with the relocation but not specifically covered by the program. The allowance is equal to one week s salary. The annual salary as indicated on the Employee Relocation Authorization Form will be used in the calculation. Tax assistance is provided for federal, state and local income taxes and FICA. Page 7

8 Some examples of expenses which the allowance is intended to help offset are: Miscellaneous Expense Allowance - Description of Coverage Laundry and dry cleaning Driver s license/automobile registration Cable TV, satellite, phone and utility hook-up/installation Connection of household appliances not performed by the moving company Storage beyond the 30 days provided Pet transportation, boarding/kennelling and care Newspapers and movies Shipment of items not covered under the movement of household goods program Telephone calls Additional tax obligations not covered by BP s Tax Assistance 4.3 Cost of Living Allowance (COLA) The transferee may be provided with financial assistance for a specified period of time if he/she will be working in a new location with a higher cost of living, as determined by BP. This assistance will be provided if the cost of living at the new work location, as determined by BP, is higher than at the old work location. This determination is based on information provided by Runzheimer International, an independent company that specializes in this area and whether the transferee s Early Experience Program provides for it. The Relocation Coordinator will advise the transferee if he/she qualifies for assistance. The transferee may not receive an allowance for the area to which he/she is relocating, but the transferee may perceive the area as high cost. Personal choice with regard to housing and lifestyle is a factor in that perception. BP is not responsible for the continuation of a standard of living to which the transferee has become accustomed. Replicating the old location square footage, price per square foot, amenities, etc. is not a goal of BP s program. The COLA is not subject to negotiation. For further information, please see the Appendix. The Relocation Coordinator will provide the amount of the COLA for which the transferee is eligible and coordinate the delivery of the payment through BP s payroll. The date the transferee s move authorization is processed by the relocation service provider will be used to capture the COLA indices and annual salary used in the calculation. 4.4 Home Maintenance Assistance in the Departure Location If the transferee is a homeowner and his/her home in the departure location remains vacant during the period of assignment, a payment of $100 per month will be provided to assist with home maintenance such as lawn care or pool maintenance. This payment is considered income and tax assistance will be provided. If the transferee's family remains in the home or if the transferee chooses to rent out the home during the period of assignment, the transferee will not be eligible for the monthly maintenance payment for any time during which the home is not vacant. Page 8

9 5 Household Goods Shipment The Self Move Option 1 is provided to the transferee who is not moving to Alaska and whose family remains in the departure location during the period of the assignment. For all other transferees, the Relocation Coordinator will coordinate the physical movement of the transferee s household goods. To ensure enough time to make arrangements, the transferee should contact the Relocation Coordinator in the early planning stages of the move. The Relocation Coordinator will arrange for a professional mover to contact the transferee to assess packing and shipping requirements and to plan times for packing, pickup and delivery of the transferee s household goods to the new home and explain the claims process. The following expenses to move normal household goods from the transferee s old location to the new location will be paid: Packing, loading and transportation. Unloading and initial placement of furniture. Unpacking. Disconnection and reconnection of appliances. One debris pick-up within 45 days of delivery for any crates and cartons the transferee unpacks (this does not include personal trash). Storage up to 30 days when the transferee is required to vacate the home at the old location before the transferee is able to occupy a home at the new location. If the transferee is unsure about whether some of the items are considered normal household goods, the Relocation Coordinator can provide clarification. Non-covered Moving Expenses. Transportation of items not covered under this policy includes (but is not limited to): Building supplies such as lumber, wall board, sand, cement, bricks, insulation, shingles, fences. Boats or canoes, 14 feet and over, or motorized over 10 horsepower. Coal or firewood and/or other flammable or hazardous materials. Coin and/or stamp collections, currency, jewelry, furs, securities, wine, precious metals or stones. Collectibles. Important documents. Frozen foods and/or perishables. Pets and/or livestock. Doghouses over 100 pounds, tree houses, dog runs. Storage sheds with panels over 6 feet x 8 feet. Trailers for camping and utility. Free standing hot tubs. Above ground swimming pools. Yard ornaments including concrete furniture, statues, gazebos, wishing wells. Page 9

10 Any item too large for two people to handle safely. Non-Covered Services Related to Moving: The following services are not covered under this policy: Appraisals of antiques and/or high value items. Disassembly and/or reassembly of playhouses, portable hot tubs, above ground swimming pools, satellite dishes, storage sheds. Removal and/or reinstallation of antenna. Removal and/or hanging of curtains and drapes. Removal and /or reinstallation of permanently attached objects such as carpeting, drapery fixtures or rods, electrical fixtures, mirrors or pictures, plumbing fixtures, attached shelving. Removal of goods from attics or crawl spaces not accessible by permanent stairwell or other easy access. Electrical or plumbing services over and above normal appliance hook-up (i.e., installing a water line, gas line or upgrading an outlet). These lists are not all-inclusive, and the transferee should discuss any questions with the Relocation Coordinator. An extra pick-up or delivery stop is permissible if approved in advance by the Relocation Coordinator and provided the stop is en route to the transferee s new location. The maximum charge allowed for an extra stop is $100. Pick-up and delivery dates for household goods are scheduled only Monday through Friday. The household goods will be insured up to a maximum of $200,000 for possessions that are being transported to the new location or held in storage. Should the transferee need additional insurance coverage, the transferee may be required to substantiate the estimate by providing a copy of the transferee s Homeowner's Personal Contents policy page to the Relocation Coordinator indicating the transferee s coverage amount and/or other documentation as determined by BP prior to an increase in the insurance coverage beyond $200,000. Charges for shipping household pets, additional insurance on items of extraordinary value or any out-of-policy expenses are the transferee s responsibility and may be offset by the Miscellaneous Expense Allowance, if applicable. 5.1 Automobiles BP will pay to ship one (1) car if the distance is over 400 miles. For the transferee whose family relocates to the destination location during the assignment, BP will ship up to two (2) cars if the distance is over 400 miles. Any cars shipped must meet eligibility requirements. The Relocation Coordinator can provide details. 5.2 Moves into/out of Alaska Transferees moving into or out of Alaska are allowed an air shipment based on family size, as follows: Family Size 1 Family Size 2 Family Size 3+ One D container One LDN container One LDN plus one E container Page 10

11 The air shipment is intended for basic living necessities that the transferee may need while waiting for the household goods shipment to arrive. In addition, transferees moving in or out of Alaska may separately ship one recreational boat or vehicle of up to 16 feet in length. 5.3 Preparing Oil/Gas Equipment That Ships with the Household Goods In support of BP s corporate focus on safety, oil/gas powered equipment such as motorcycles, small recreational vehicles, riding lawn mowers, push lawn mowers, yard equipment, chain saws, weed eaters, etc., will be properly prepared, at BP s expense, to ship with the transferee s household goods. Proper shipment preparation requires the oil and gas to be drained from the equipment by a certified professional company. Equipment not properly drained and ready to ship on packing day must be shipped as a second shipment at the transferee s expense and responsibility. 5.4 Self Move If the transferee chooses a self move option in lieu of a professional mover the transferee may choose one of the following options: Option 1: The transferee will be reimbursed for the use of a trailer attached to the transferee s own vehicle to transport all or part of the personal effects. The transferee will be reimbursed for the trailer expense at 4 cents per mile in addition to the Company s normal mileage rate for the use of the transferee s own vehicle. A receipt for the trailer rental must be submitted to the relocation service provider for reimbursement. Option 2: The transferee will be reimbursed for renting a truck for moving the personal effects. Truck rental expense and fuel for the truck will be reimbursed. Receipts for the truck rental and gas must be submitted to the relocation service provider for reimbursement. Additionally, the transferee will be reimbursed final move mileage for driving the transferee s vehicle to the new location. The Self Move Option is not provided to transferees relocating to and from Alaska. 6 Housing in the New Location All transferees moving to a new location will be provided home finding assistance through the relocation service provider. Renters - Transferees who are renters in the current location are expected to terminate their current lease and pay their own housing costs in the new location. BP will pay any required lease cancellation fees or expenses limited to the lesser of three months rent or the balance of rent due under the terms of the lease. Documentation of lease cancellation and necessary expenses will be required. Lease cancellation expenses are considered taxable income and will be tax assisted. Transferees who are renters in the current location and whose family will remain in the current location during the assignment period will be provided with a furnished one-bedroom corporate apartment in the assignment location. Page 11

12 Homeowners - Transferees who are homeowners in the current location are expected to maintain their current mortgages and related home expenses in anticipation of return at the conclusion of the assignment. Such transferees will be provided with a furnished one-bedroom corporate apartment in the assignment location. 7 Final Move Lodging and travel associated with the final move trip are reimbursed separately (from the lump sum payment). The transferee will be reimbursed for coach class airfare, 14-day advance purchase for the transferee and his/her relocating family. If the move distance is less than 250 miles, mileage will be reimbursed at the current IRS mileage rate, in lieu of airfare, for up to two vehicles (one vehicle for the unaccompanied transferee) driven to the new location. In addition, reimbursement for one night's lodging at the old location (after the transferee s furnishings have been removed from the former home) and one night's lodging immediately upon arrival at the new location plus one night's lodging for every 400 miles travelled should the transferee drive to the new location will be provided. Additional expenses incurred, including those while awaiting delivery of household goods, will not be reimbursed. Actual receipts will need to be submitted to the relocation service provider for reimbursement. Some of these expenses are excludable from income; those that are not will be tax assisted. 8 Travel between Locations Transferees whose family will remain in the current location while the transferee is on assignment will be provided with a $500 monthly payment for personal travel expenses between the two locations. The transferee may use these funds toward travel expenses for himself/herself to return to the home location or toward travel expenses for family members wishing to visit the assignment location. This payment is considered income and tax assistance will be provided. Any travel necessary to conduct business will be treated as a business deductible expense and reimbursed under normal business expense procedures. 9 Extended Assignments If a transferee is asked to stay in the same location for another rotation, regardless if it is with a different strategic performance unit/business unit/function, the transferee will not receive relocation assistance. It is reasonable to assume that the transferee has already been reimbursed for the incurred cost of moving at the start of the previous assignment and thus would not incur any other costs by simply staying for another rotation. If applicable, the transferee will continue to receive COLA payments (as described in Section 4.3) to assist with the ongoing adjustment to the higher costs related to housing, goods and services, and taxes experienced as a result of staying in this location. If applicable, eligible ongoing assistance (i.e. home maintenance, housing, travel between locations) will be provided during the extended assignment period. Page 12

13 10 Completion of Program Upon completion of any of the Early Experience Programs, a transferee may be eligible for relocation assistance. One of the following will apply: 10.1 Move Back to Point-of-Origination A transferee who returns to the location in which he/she originated will be eligible for the following: Miscellaneous Expense Allowance. Homefinding Trip -- if necessary. Lease Cancellation -- if necessary. Movement of Households Goods. Final Trip to New Location Stay in Current Location If currently receiving COLA payments, a transferee accepting a job in the current location will continue to receive COLA payments (as defined in Section 4.3) to assist with ongoing adjustment to the higher costs related to housing, goods and services, and taxes experienced as a result of staying in this location. In addition: 1. A renter will receive no further relocation benefits except, if applicable, continued COLA payments. 2. A homeowner who still owns a house in the origin location will cease to receive eligible ongoing assistance (i.e. home maintenance, housing, travel between locations, state tax assistance) and instead be eligible for the relocation benefits under the Transferred Exempt Transferee/Experienced New Hire policy Move to a New Location This applies to a transferee who will be relocating to a new location other than the current location and the origin location. 1. Renter - a renter will be treated as a transferred exempt transferee and will be eligible for the relocation benefits available under the Transferred Exempt Transferee/Experienced New Hire policy. 2. Homeowner - a homeowner who still owns a house in the origin location will be treated as a transferred exempt transferee and will be eligible for the relocation benefits under the Transferred Exempt Transferee/Experienced New Hire policy. In addition, the transferee will receive reimbursement for one return trip to the origin location and the Self Move Option 1, in order to relocate to their new location. 11 Tax Considerations It is BP s intent to provide tax assistance to a transferee who is receiving payments or reimbursement for taxable temporary assignment expenses so that his/her tax burden is not significantly increased by receipt of the temporary assignment payments or reimbursements. For the duration of the transferee s participation in any US Based Early Experience Program, tax assistance will be provided on the benefits provided under this policy that are considered taxable income to the transferee with the exception of COLA. Tax assistance provided on eligible taxable payments and the tax assistance calculation will include estimated federal, FICA (Social Security, if applicable, and Page 13

14 Medicare), and applicable state and local income taxes. Taxability of expenses is determined based on the premise that the assignment is expected to exceed 12 months. For avoidance of doubt, the state tax assistance described below does not apply upon completion of any US Based Early Experience program Tax Rates Every effort is made to reasonably estimate a transferee s tax liability based on the work location change. It is not possible to calculate tax assistance exactly, as each individual s circumstances are unique. Tax assistance calculations for temporary assignments are based on general guidelines and assumptions; it is possible that a transferee s tax liability could be different depending on his/her personal situation. A transferee may work in a temporary assignment state (location) for only a portion of a year or for an entire tax year; the length of time spent working in each state location impacts the calculation of taxable income for that state, based on regular compensation. Depending on the circumstances of the assignment, the inclusion of a state tax rate may vary depending on whether the tax assistance calculation is for payments or for compensation. For the purpose of determination of tax rates, the work state will provide the basis for tax assistance calculations. Departure work state is where the transferee worked before he/she left on the rotational assignment. Assignment work state is where the transferee is assigned to work temporarily during the rotational assignment. The departure work state can be different than the state where the transferee actually has his/her permanent residence, but for the purposes of tax assistance calculations, applicable to this policy, the work state is used. If the transferee has several, backto-back temporary assignments, the departure work state is still the state where the transferee worked prior to accepting any of his/her temporary assignments Tax Assistance Calculations During the year, tax assistance calculations for assignment/relocation payments and expenses are based on supplemental rates. At the end of the year, a true-up adjustment is made to adjust the tax assistance rate to the marginal rate associated with the transferee s BP W-2 earnings. For the transferee whose family remains in the departure location for the period of the assignment, state tax assistance calculations for regular compensation are based on the difference between the departure work state and the assignment work state to compensate the transferee for additional state tax withholdings that have been deducted from regular compensation during the assignment period Tax Assistance on Compensation For the transferee whose family remains in the departure location for the period of the assignment tax assistance on compensation (non-assignment/relocation payments and expenses) is provided when the assignment work state tax rate is greater than the departure work state tax rate. The calculation is a two-part calculation. The first is calculated for any difference in state tax on compensation earned in that state for that year (using assignment start and assignment end dates), and then any applicable additional tax assistance for federal, FICA (Social Security, if applicable, and Medicare), and applicable state and local income taxes based on the work state location at time of state tax assistance payment. A transferee may be in a specific state for only a portion of a year, which impacts the calculation of taxable income for that state, based on regular compensation. If the Page 14

15 work start date for the rotational assignment is late in the year, then the transferee may have a lower tax rate for that state, based on income earned and reported to that state during the year. The following example will illustrate the two-part calculation: Calculation 1: Transferee s eligible taxable compensation: $75,000 Transferee s departure work state: Alaska Transferee s assignment work state: Illinois Transferee s departure state tax: Zero (Alaska has no state income tax) Transferee s assignment work state tax: $2,250 State tax assistance due transferee: $2,250 Calculation 2: State tax assistance due transferee: $2,250 Gross-up on tax assistance payment: $1,080 Total state tax assistance payment: $3,330 NOTE: Other income such as investments and spousal income will not be considered in the tax assistance calculation. Further, there will not be a recalculation of tax assistance based on actual differences in taxable income nor is there a guarantee to keep the transferee whole Paying and Reporting Tax Assistance State tax assistance for regular compensation will be paid to the transferee via the payroll system. This payment is based on estimates and thus may not always result in exact or complete gross-up of applicable expenses. Any additional tax liability not covered by the tax assistance calculation is the transferee s responsibility. It is the transferee s sole responsibility to maintain all records and receipts necessary to claim allowable federal, and where applicable, state and local income tax deductions Reciprocity Reciprocity is a term used to refer to the granting of mutual concessions between states, in reference to state income taxes. A reciprocity agreement between states generally infers that a taxpayer who has income in both states should not have to pay taxes on the same income in both states. In the context of a rotational assignment, the reciprocity agreement usually allows the taxpayer to take a deduction in one state (usually their home state, or in the case of a rotational assignment, the departure work state) for any income taxes owed/paid in the other state. The tax assistance calculation assumes a reciprocity agreement is in effect between the departure work state and the assignment work state. In cases where both states have state income tax, it is assumed that the transferee will have a tax liability in the assignment state, but that they will be able to take a deduction in the departure work state return for any taxes owed/paid to the assignment state. Not all states have reciprocity agreements. If the transferee s rotational assignment involves two states that do not have a reciprocity agreement, it is possible the Page 15

16 transferee will incur tax liabilities in two states. In this situation, assistance will be addressed on an individual basis Other Assumptions Made In applying tax assistance to rotational assignment payments, it is assumed that the rotational assignment payments will be reported as income in the assignment state. Therefore, the assignment state is usually the state used to determine the state tax rate for payments. However, if the assignment state tax rate is 0, and the departure state work state has a state income tax, then the payments and related tax assistance are reported as income to the departure state. When applying tax assistance to compensation, if the assignment state rate is zero or lower than the departure state, there would be no state tax assistance. However, when the assignment state rate is higher than the departure state, it is assumed that the transferee will have a tax liability in the assignment state, but that they will be able to take a deduction in the departure work state return for any taxes owed/paid to the assignment state State Income Taxes Withheld Through Payroll BP withholds state income tax based on state tax law. This can be complicated when a transferee has a residence in one state but works in another. Depending on whether or not the two states have reciprocity agreements, the transferee may have taxes held for the work state only, the residence state only, or both states. The transferee data in the Payroll system will cause appropriate withholding to be applied, depending on residence state of record, and work state of record. Generally, taxes will be withheld as follows: Current Assignment Status No residential state income tax and state income tax in work state Residential state income tax plus work state income tax with no reciprocity Residential state income tax plus work state income tax with reciprocity Tax Implication State taxes withheld based on work state State taxes withheld for both states State tax withheld from one state based on specific reciprocity agreement In cases where withholding is being applied for both states, or on the assignment work state in addition to the tax assistance provided, the transferee may want to explore with a tax professional whether to adjust their W-4 to have less state tax withholding applied to regular paychecks, and to understand the impact and implications of any such adjustment. Transferees are cautioned to ensure that appropriate withholding is applied, to avoid any penalties for under-withholding. It is possible that a transferee will have a tax liability in a state for which no withholdings are being taken. This could happen when the rotational assignment state has no state income tax, and other payroll system data or settings are such that the residential state withholding is not applied. In such cases, the transferee will want to avoid incurring a tax penalty by making quarterly payments of estimated taxes. It is important for the transferee to pay attention to their pay statement in order to confirm that appropriate withholding is being applied. If a penalty is incurred through no fault of the transferee, BP will assist with its payment. However, it is best to avoid penalties to minimize the risk of triggering an individual IRS audit. Page 16

17 11.8 Tax Advice Nothing in this document about taxes is intended to be tax advice. Transferees are encouraged to retain all receipts and other documents related to their relocation, and to seek professional tax counseling in the preparation of tax returns, or with any questions. Tax Treatment Summary Table Reimbursement Added to W-2 Taxable Income Tax Assistance Lump Sum Payment Yes Yes Yes Miscellaneous Expense Yes Yes Yes Allowance Cost of Living Allowance Yes Yes No (COLA) Current Home Yes Yes Yes Maintenance Household Goods Excludable No N/A Shipment Storage of Household Excludable No N/A Goods (1st 30 days) Housing in New Location Yes Yes Yes Final Move Travel Excludable No N/A Travel between Current and New Sites For business Personal travel No Yes No Yes No Yes Page 17

18 APPENDIX: Cost of Living Allowance (COLA) PURPOSE The intent of this program is to provide assistance to the eligible transferee participating in any Early Experience program that provides this benefit and moving to a high cost-of-living location at BP s request. The assistance is designed to provide the transferee with temporary financial support to offset some of the increased cost that he/she may experience as he/she acclimates to the new location. CALCULATION Under this policy, a transferee will receive COLA benefits in the form of monthly payments. The monthly payments will be the same for the first 12 months of an assignment. If the assignment extends beyond 12 months, payments over the next 12 months will be at a reduced rate equal to 2/3 of the first set of payments. If the assignment should extend beyond 24 months, the monthly payments will be reduced again to equal 1/3 of the original monthly payments. Payments will end the earlier of the end of the assignment or 36 months. For transferees who relocate again within the 36 months, the compounded move will result in a recalculation of the COLA. The COLA payments are treated as taxable income and appropriate taxes will be withheld at the time of payment with no tax assistance. BP uses the following table to determine the term and amount of the payments: EXAMPLE: Cost-of-Living Eligibility Term Payment Year Payout Percentage of Differential Amount 1-12 months 1 st 100% months 2 nd 67% months 3 rd 33% Annual Cost-of-Living Differential = $5,000: 1 st Year Payment = $5,000 2 nd Year Payment = $3,350 3 rd Year Payment = $1,650 Total Payment = $10,000 Page 18