IRS Addresses Donation Programs to Aid Louisiana Storm Victims

This notice provides guidance on the treatment of leave-based donation programs to aid victims of the severe storms and flooding in Louisiana that began on August 11, 2016 (Louisiana storms).

TREATMENT OF LEAVE-BASED DONATION PAYMENTS

In response to the extreme need for charitable relief for victims of the Louisiana storms, employers may have adopted or may be considering adopting leave-based donation programs. 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 described in § 170(c) of the Internal Revenue Code (§ 170(c) organizations). This notice provides guidance for income and employment tax purposes on the treatment of cash payments made by employers under leave-based donation programs for the relief of victims of the Louisiana storms.

Notice 2014-68, 2014-47 I.R.B. 842, Notice 2012-69, 2012-51 I.R.B. 712, and Notice 2005-68, 2005-2 C.B. 622, provided similar guidance following the Ebola Virus Disease outbreak in West Africa, Hurricane Sandy, and Hurricane Katrina, respectively. See also Notice 2001-69, 2001-2 C.B. 491, as modified and superseded by Notice 2003-1, 2003-1 C.B. 257, regarding charitable relief following the September 11, 2001, terrorist attacks.

The Service will not assert that cash payments an employer makes to § 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are: (1) made to the § 170(c) organizations for the relief of victims of the Louisiana storms; and (2) paid to the § 170(c) organizations before January 1, 2018.

Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees. Electing employees may not claim a charitable contribution deduction under § 170 with respect to the value of forgone leave excluded from compensation and wages.

The Service will not assert that an employer is permitted to deduct these cash payments exclusively under the rules of § 170 rather than the rules of § 162. Cash payments to which this guidance applies need not be included in Box 1, 3 (if applicable), or 5 of the Form W-2.

DRAFTING INFORMATION

For further information, please contact Sheldon Iskow of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 317-4718 (not a toll-free call).