Under an employer leave-based donation program, employees may elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments of an equivalent value to one or more charitable organizations as defined under IRC Section 170(c). Absent specific guidance to the contrary, these cash payments generally are treated as taxable compensation to employees under assignment of income or constructive receipt principles. Over the years, the IRS has provided guidance allowing tax-favorable treatment for employer leave-based donation programs established to assist victims of disasters, including presidentially declared disasters (Notice 2006-59) and the COVID-19 pandemic (Notice 2020-46 and Notice 2021-42).
Under the notice, victims of the Russian invasion of Ukraine include citizens or residents of Ukraine; individuals working, traveling, or currently present in Ukraine; and refugees from Ukraine. The guidance is applicable through the end of 2022. The tax ramifications of an employer leave-based donation program established under Notice 2022-28 are as follows:
Employers wanting to provide employees with a noncash, tax-favorable mechanism for assisting victims of the Ukraine crisis should consider establishing an employer leave-based donation program. While Notice 2022-28 provides tax-favorable treatment of these programs for federal tax purposes, employers should consider the possible state and local tax ramifications of such programs before establishing one.
Transfer pricing during economic uncertainty
CO’s pass-through entity tax retroactive to 2018