IRS Encourages Leave Donation Programs for Hurricane Relief

IRS Encourages Leave Donation Programs for Hurricane Relief

The IRS is encouraging employers to establish Hurricane Katrina Relief leave donation programs and is providing special tax treatment to support such programs. Under a leave donation program, employees can elect to forgo their vacation, sick or personal leave in exchange for the employer making cash payments to a qualified tax-exempt organization providing relief for victims of Hurricane Katrina.

The program allows employees to donate the cash value of some of their leave time, without it being included in their taxable income. In addition, employers do not pay payroll taxes on the cashed-out leave time.

Recognizing that the disaster will have long-term consequences, the IRS will continue the favorable tax treatment for payments made through December 31, 2006.

For details about the program and answers to frequently-asked questions for both employers and employees, go to http://www.irs.gov/newsroom/article/0%2C%2Cid=148114%2C00.html.

A number of employers, including Seattle, King County, Ellensburg, and Anacortes, have already adopted leave-based donation programs.