Following FEMA's major disaster declaration for Texas and Hurricane Harvey, the IRS has announced that employee leave-based donations when paid by employers to an IRC Section 170(c) charitable organization are exempt from taxable wages and are not reported on the Form W-2, Wage and Tax Statement. (IRS Notice 2017-48.)

Nature of the relief

As set forth in Notice 2017-48, the value of the leave donations that an employer makes to an IRC Section 170(c) charitable organization in exchange for vacation, sick or personal leave that its employees elect to forgo is excluded from wages subject to federal income tax, federal income tax withholding, Social Security, Medicare and federal unemployment insurance of the employees provided that the payments are:

— Made to IRC Section 170(c) charitable organizations for the relief of victims of Hurricane Harvey and Tropical Storm Harvey

— Paid to the IRC Section 170(c) charitable organizations before January 1, 2019

The following also applies to qualifying leave-based donations:

— The opportunity to make the election to donate leave does not result in the constructive receipt of gross income or wages to the employees making the election.

— Leave-based donations meeting these requirements are not reported on Form W-2 in boxes 1, 3 or 5.

— Employers may deduct those cash payments as wages under the rules of IRC Section 162.

— Employees donating leave may not claim a charitable deduction under IRC Section 170 for the value

———————————————
RELATED RESOURCES

— For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg.

———————————————