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IRS Update: Employer Leave Based Donation Programs to Aid Victims of the Further Russian Invasion of Ukraine

Notice 2022-28, 2022-23 IRB

In the above referenced notice, the IRS said employer leave-based donation payments by an employer before January 1, 2023, to Code Sec. 170(c) organizations to aid victims of Russia's invasion of Ukraine will not be treated as gross income or wages of the employer's employees.

Under an employer leave-based donation programs, an employee can elect to forgo vacation, sick, or personal leave in exchange for the employer's making cash payments to charitable organizations described in Code Sec. 170(c) ("Section 170(c) organizations"). Cash payments made by an employer to Section 170(c) organizations under an employer leave-based donation program are referred to as "employer leave-based donation payments."

The notice specifically provides that employer leave-based donation payments made by an employer before January 1, 2023, to section 170(c) organizations to aid victims of the invasion of Ukraine by Russian forces beginning on February 24 (qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employer's employees.

Similarly, employees who elect or who have an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable).

Employers should not include the amount of qualified employer leave-based donation payments in Box 1, 3 (if applicable), or 5 of an electing employee's Form W-2. Electing employees are not eligible to claim a charitable contribution deduction under Section 170 for the value of the forgone leave that funds qualified employer leave-based donation payments.

An employer may deduct qualified employer leave-based donation payments under the rules of Code Sec. 170 or Code Sec. 162 if the employer otherwise meets the respective requirements of either section.

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Martin D. Hauptman, Esq., Chair of the ERISA and Employee Benefits department at Mandelbaum Barrett is available to answer any questions you may have.