IRS Provides Special Tax Relief for Leave Donations to Victims of Russian Invasion of Ukraine

On May 19, 2022, the IRS issued Notice 2022-28, which provides special tax relief for employers that set up leave-based donation programs to aid victims of the further Russian invasion of Ukraine. Leave-based donation programs involve employees who give up their vacation, sick, or personal leave time in exchange for their employers giving cash donations to a chosen charitable cause. 

The typical concerns about leave-based donation programs are that employers must include the leave-based donation in the employee’s taxable income and that an employee might be taxed on income since they could donate it under the theory of “constructive receipt” of income.

Notice 2022-28 addresses both these potential tax concerns. First, the notice provides that if employers make cash donations to qualified tax-exemption organizations, under employee leave-based donation programs, in specific circumstances, the donations will not constitute taxable income to the employees. This exemption from taxable income will remain in effect for all donations that employers make as a result of leave donation programs, before January 1, 2023, for the relief of victims of the further Russian invasion of Ukraine. 

Secondly, the notice provides that the opportunity to donate leave time will not result in constructive receipt of income for the employees. As a result, employees who elect to donate leave may not deduct the value of the donated leave on their income tax returns. Otherwise, the employees would be enjoying double tax benefits, i.e., excluding the donation from their taxable income and using it as a deduction on their tax returns. Employers can deduct the donations as charitable contributions or as trade or business expenses, provided that all requirements are met.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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