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IRS Approves Leave-Sharing Program to Aid Victims of Hurricane Harvey

Sep 14, 2017 11:30:06 AM

The IRS is providing income and employment tax relief on employer leave-based donation programs to aid victims of Hurricane Harvey and Tropical Storm Harvey [IR 2017-143, 09/05/2017; Notice 2017-48, 2017-39 IRB].

Under an employer leave-based donation program, employees elect to forgo vacation, sick, or personal leave in exchange for cash payments an employer makes to organizations described in Code Sec. 170(c).

The IRS will not assert that cash payments an employer makes to Code Sec. 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect not to take constitute gross income or wages to the employees if the payments are: (1) made to Code Sec. 170(c) organizations for the relief of Hurricane and Tropical Storm Harvey victims; and (2) paid to the Code Sec. 170(c) organizations before Jan. 1, 2019.

Similarly, the IRS will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages to the employees.

Electing employees may not claim a charitable contribution deduction under Code Sec. 170 with respect to the value of forgone leave excluded from compensation and wages.

Cash payments to which this guidance applies need not be included in Box 1, 3 (if applicable), or 5 of an employee’s W-2 form.

In other words, these amounts are not subject to income and payroll tax withholding.

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