IRS Gives Guidance on Leave Donations Related to Ebola

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In Notice 2014-68, the Internal Revenue Service (IRS) provided guidance on the treatment of leave-based donation programs to aid victims of the Ebola outbreak in the West African countries of Guinea, Liberia, and Sierra Leone for income and employment tax purposes.

As of October 22, 2014, more than 4,800 Ebola-related deaths and more than 9,900 suspected and confirmed cases of Ebola have been reported by Guinea, Liberia, and Sierra Leone.  In addition, the reported number of cases of Ebola continues to increase rapidly in those countries.  President Obama has stated that the Ebola outbreak in West Africa is a public health emergency, a humanitarian crisis, and a national security priority, and has directed U.S. agencies and departments (including the Departments of State, Defense, and Health and Human Services, the Centers for Disease Control and Prevention, and the U.S. Agency for International Development) to assist West African governments in their responses.  The President has also called on other nations regarding the need for more robust commitments and rapid delivery of assistance by the international community.

In view of the extreme need for charitable relief due to the Ebola outbreak in Guinea, Liberia, and Sierra Leone, employers may have adopted or may be considering adopting leave-based donation programs to aid victims of the Ebola outbreak in Guinea, Liberia, and Sierra Leone.  Under these programs employees elect to forgo vacation, sick, or personal leave in exchange for cash payments an employer makes to organizations described in § 170(c) of the Internal Revenue Code for the relief of victims of the Ebola outbreak in Guinea, Liberia, and Sierra Leone.  This notice provides guidance on the treatment of these payments for income and employment tax purposes.

Notice 2012-69, 2012-51 I.R.B. 712, and Notice 2005-68, 2005-2 C.B. 622, provided similar guidance in view of the extreme need for charitable relief following Hurricane Sandy and Hurricane Katrina, respectively.  The IRS 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 Ebola outbreak in Guinea, Liberia, and Sierra Leone; and (2) paid to the § 170(c) organizations before January 1, 2016.

Similarly, the IRS 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 IRS will not assert that an employer will be only permitted to deduct these cash payments under the rules of § 170 rather than the rules of § 162.  Cash payments to which this guidance applies need not be included on an employee’s Form W-2, Wage and Tax Statement.

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