Leave-based donation program available during pandemic

June 12, 2020

JofA article

The Internal Revenue Service says employers may make donations this year to charitable organizations that provide relief to coronavirus pandemic victims in exchange for personal leave employees forgo. Payments are not treated as compensation to employees, and employers may qualify for deductions under Sec. 170 or 162.

The IRS on Thursday issued guidance on leave-based donation programs, permitting employers to make deductible monetary donations for relief of victims of the COVID-19 pandemic based on the value of sick, vacation, or personal leave that employees voluntarily forgo (Notice 2020-46). The donated amounts will not be treated as compensation to the employees, and employees will not be allowed to claim a charitable contribution deduction for the value of forgone leave.

Cash payments an employer makes to a Sec. 170(c) organization in exchange for vacation, sick, or personal leave that its employees elect to forgo will not be treated as wages (or compensation) to the employees or otherwise be included in the employees’ gross income if the payments are: (1) made to Sec. 170(c) organizations for the relief of victims of the COVID-19 pandemic in affected geographic areas; and (2) paid to the organization before Jan. 1, 2021.

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