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IRS addresses leave-based donations for Ukraine

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Tax Hot Topics newsletter The IRS recently issued Notice 2022-28 to provide guidance on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the “further Russian invasion of Ukraine.”

Under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations described in Section 170(c). The notice defines “Ukraine victims” broadly to include citizens and residents of Ukraine; individuals working, traveling or currently present in Ukraine and refugees from Ukraine.

Employees will not be treated as receiving taxable income or wages and will not be considered as constructively receiving taxable income for employer leave-based donation payments made before Jan. 1, 2023, to aid Ukraine victims. Further, employees will not be permitted to claim a charitable contribution deduction under Section 170 for the value of the applicable forgone leave. Employers will be permitted to deduct qualified employer leave-based donation payments under Sections 170(c) or 162, provided all other requirements under those sections are met.

This guidance is similar to the guidance provided by the IRS in Notice 2001-69 regarding charitable relief following the Sept. 11, 2001, terrorist attacks.

Contact:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

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