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In view of the extreme need for charitable relief in the aftermath
of Hurricane Katrina, the IRS is allowing employers to adopt leave-based
donation programs where employees may elect to forgo vacation, sick
or personal leave in exchange for cash payments which are directly paid,
by the employers, to Code Section 170(c) charitable organizations. (To
find a Code Section 170(c) charity, go to the IRS website at http://apps.irs.gov/app/pub78.)
These cash payments will not constitute gross income to the electing
employees if the payments are (1) made to a Code Section 170(c) charitable
organization for the relief of victims of Hurricane Katrina, and (2)
paid before January 1, 2007. Furthermore, the opportunity to make such
an election will not result in constructive receipt of gross income
or wages for employees. Electing employees may not claim a charitable
contribution deduction for the value of the leave, although employers
will be permitted to deduct the payments as trade or business expenses.
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