The Federal Emergency Management Agency (FEMA) and IRS declared a qualified disaster for California wildfires and straight-line winds, postponing certain deadlines to Oct. 15, 2025, and creating opportunities for employers to provide tax-free qualified assistance to their employees.
FEMA’s disaster declaration activates section 139, which excludes qualified disaster relief payments from gross income. In addition, it permits employer-sponsored private foundations to provide assistance to related employees without violating the self-dealing rules. Moreover, it excepts certain “donor advised funds” from that definition, permitting advisors to recommend qualified disaster relief distributions to individuals.
Employers may also establish a leave-based charitable donation program under which employees can forgo leave and not recognize it in income, in exchange for employers making a donation to a section 170(c) charitable organization. The IRS must specifically authorize this relief for a disaster. As of the date of this publication, the IRS has not authorized such a program for the California wildfires.
Read RSM’s How employers can assist employees impacted by major disasters and Qualified disaster relief through charitable organizations for more information.
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