Guidance on Leave-Based Donation Programs

The IRS issued Notice 2020-46 which provides guidance for employers that offer leave-based donation programs to aid victims of the Coronavirus pandemic. Under these programs, employees may elect to relinquish vacation days, sick days, or personal leave in exchange for cash donations the employer makes to eligible charities that help victims of the pandemic.

Leave-Based Donation ProgramsThe guidance states the leave-based donations will not be treated as wages or gross income to the employees as long as it is paid to section 170(c) charitable organizations before January 1, 2021. Employers don’t need to report the donations on employees’ Form W-2 since employees aren’t receiving the value of the leave as income.

In addition, employees can’t claim a charitable contribution deduction for the value of the leave from leave-based donation programs. However, employers can deduct the payments as a business expense or charitable contribution deduction if the employer otherwise meets the respective requirements of either section.

Read IRS Notice 2020-46 here.

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