- news
- CHARITABLE CONTRIBUTIONS
Leave-Based Donation Programs Allowed for Hurricane Sandy Relief
Please note: This item is from our archives and was published in 2012. It is provided for historical reference. The content may be out of date and links may no longer function.
Related
Treasury posts preliminary list of jobs eligible for no tax on tips
Tax strategies for highly appreciated undeveloped land
Proposed regulations issued on retirement catch-up contributions
In response to the extraordinary damage caused by Hurricane Sandy and the extreme need for relief, the IRS has released guidance for employers who are considering adopting leave-based donation programs to aid the storm’s victims (Notice 2012-69). A leave-based donation program allows employees to forgo vacation, sick, or personal leave in exchange for cash payments by the employer to a charity. The IRS allowed favorable tax treatment for similar programs in the wake of Hurricane Katrina in 2005.
Under Notice 2012-69, the IRS will not treat as gross income or wages of the employees any cash charitable donations made by their employer to a Sec. 170(c) organization in exchange for vacation, sick, or personal leave that the employees elect to forgo. The payments must be made to a Sec. 170(c) organization for the relief of victims of Hurricane Sandy and be paid before Jan. 1, 2014.
However, employees who forgo leave under such a program will not be allowed to take a charitable deduction for the value of the forgone leave excluded from their compensation.
The IRS will allow employers to deduct these cash payments either as charitable contributions or gifts under Sec. 170 or as trade or business expenses under Sec. 162.
Employers who make cash payments to which Notice 2012-69 applies do not need to report them in Box 1, 3 (if applicable), or 5 of an employee’s Form W-2, Wage and Tax Statement.