5 U.S.C. § 5520 — Withholding of city or county income or employment taxes

(a) If a city or county ordinance (1) generally requires employers to withhold money from employees’ pay and send it to a designated local officer, department, or instrumentality, and (2) generally requires withholding from compensation earned within the jurisdiction by employees whose regular workplace is there, the Secretary of the Treasury must, under Presidential regulations, make an agreement with the city or county within 120 days after its proper official requests one. The agreement must require each United States agency head to follow the ordinance for agency employees who are subject to the tax and either (i) regularly work for the Federal Government within that jurisdiction or (ii) are residents of that city or county. It may not apply to pay for Armed Forces service, except service described in section 5517(d). It may not allow withholding from an employee who is neither a resident of nor regularly employed in the State where the city or county is located, unless the employee consents.

(b) This section does not consent to an ordinance that burdens the United States more than other employers or subjects the United States or its employees to a penalty or liability because of this section. A United States agency may not accept payment from a city or county for withholding local income or employment taxes from its employees’ pay.

(c) Definitions. (1) “City” means a unit of general local government classified as a municipality by the Census Bureau, or a town or township that the Treasury Secretary determines (i) has powers and performs functions comparable to a municipality, (ii) is closely settled, and (iii) has no incorporated place, as the Census Bureau defines that term, within its boundaries where 500 or more people are regularly employed by all Federal agencies. (2) “County” means a unit of local general government classified as a county by the Census Bureau whose boundaries contain 500 or more people regularly employed by all Federal agencies. (3) “Ordinance” means an ordinance, order, resolution, or similar instrument properly adopted and approved by a city or county under the constitution and statutes of its State, with the force of law there. (4) “Agency” means (A) an Executive agency, (B) the judicial branch, or (C) the United States Postal Service. This section defines each term.