The IRS has provided guidance for employers who have adopted or are considering adopting leave-based donation programs to provide relief to victims of the COVID-19 pandemic.
Under leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to charitable organizations. In Notice 2020-46, the IRS provides that these donations will not be treated as compensation and employees will not be treated as receiving the value of the leave as income (and therefore cannot claim a deduction for the leave that they donated to their employer) if the payments are both of the following:
- Made to the charitable organizations for the relief of victims of the COVID-19 pandemic in the affected geographic areas.
- Paid to the charitable organizations before January 1, 2021.
Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the requirements of the applicable sections of the Tax Code.
For more information on the novel coronavirus’s impacts to employers and workers, please check out CRI’s COVID-19 Resources.