United States

IRS allows leave-based donations for California wildfire victims

Employer leave-based donation programs can now include CA wildfires

TAX ALERT  | 

In Notice 2017-70, the IRS provides guidance on the treatment of leave-based donation programs to aid victims of the California wildfires that began on Oct. 8, 2017. In the wake of recent natural disasters, employers may adopt leave-based donation programs so that their employees can forgo personal leave in exchange for contributions to charitable organizations for disaster relief.

Under leave-based donation programs, employees can elect to forgo vacation, sick or personal leave in exchange for cash payments that their employers make to certain charitable organizations. The IRS says that these cash payments are not taxable wages to the employees if the cash payments are paid to the charitable organizations before Jan. 1, 2019, for the relief of victims of the 2017 California wildfires. The cash payments are not included in Box 1, 3 or 5 of the employees’ Form W-2. Note, only leave-based pay can be donated and not regular pay.

The IRS states that these employees cannot claim a charitable contribution deduction on their individual income tax returns for the value of the forgone leave that was excluded from their taxable wages. Employers can claim a deduction for the cash payments on their tax returns.

This IRS guidance on leave-based donation programs for the 2017 California wildfires is consistent with prior IRS guidance granting leave donations for Hurricanes Harvey, Irma and Maria.

Leave-based donation programs are one method for providing support to disaster victims. Other types of tax-advantaged programs are available which allow employers and their employees to help individuals dealing with the effects of a disaster. For more information, see our article How employers can assist employees impacted by major disasters.

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