Special Relief: PTO Leave-Based Donation Programs For Victims of Hurricane Sandy

Special Relief: PTO Leave-Based Donation Programs For Victims of Hurricane Sandy

On November 6, 2012, the Internal Revenue Service (“IRS”) issued Notice 2012-69 and News Release 2012-88 which both address various tax issues associated with employees electing to donate their vacation, sick or personal leave time to certain organizations to assist the victims of Hurricane Sandy. As outlined in the guidance this applies to leave-based donations paid to qualified disaster relief organizations before January 1, 2014.

Employers are establishing leave-based donation programs whereby employees may elect to donate the cash equivalent of their vacation, sick or personal leave time to an Internal Revenue Code (“IRC”) §170(c) organization that provides relief to disaster victims. The contribution to the IRC §170(c) organization must be made before January 1, 2014.

In the currently released guidance, the IRS has stated that the accrued and unused vacation, sick or personal leave time donated by the employees does not constitute taxable wages or income to the individual making the donation and thus not includable in the employee’s Form W-2 as taxable wages. Employers are allowed to deduct the cash payments made to the charitable organization as either charitable contributions or gifts under IRC §170 or as trade or business expenses under IRC §162. Accordingly, employees making the leave-based donation are not eligible to claim a charitable deduction under IRC §170 for the value of the leave-based donation that is excluded from their respective compensation and wages. In addition, the donated leave or a check for the value of the donated leave will not be considered taxable income to the qualified disaster victims who are the recipients of this type of donation.

A copy of IRS Notice 2012-69 and News Release 2012-88 may both be accessed at the healthcare services section of our Firm’s Website.

For more information on the topics discussed or services we can provide, please contact:
Scott Mariani, JD, Partner
Practice Leader
973.898.9494 ? [email protected]

Questions or comments?
E-mail us at [email protected]

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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