In new guidance, the IRS has provided tax relief for leave-based donation programs established to aid victims of Hurricane Sandy. Similar guidance was provided after the September 11, 2001 terrorist attacks and after Hurricane Katrina in 2005.
Under a leave-based donation program, an employer allows employees to elect to forego paid leave time (e.g., vacation, sick, or personal leave), and the employer then donates the value of the foregone leave to a charitable organization.
The guidance clarifies that employees will not have taxable wage income solely because they make, or have the right to make, an election to donate leave under a qualifying leave-based donation program. Employers are allowed a full deduction for the donations, without regard to the percentage limitations on charitable contributions.
To qualify for this treatment, payments of foregone leave time must be made:
- To a qualifying charitable organization.
- For the relief of victims of Hurricane Sandy.
- Before January 1, 2014.
Employees who elect to participate in a leave-based donation program may not claim a charitable contribution deduction for the value of the foregone leave.