The IRS has issued Notice 2022-28 (the “Notice”) to explain the tax treatment of employer leave-based donation programs to aid the people of Ukraine.
The Notice begins by stating that the “invasion of Ukraine by the Russian Federation beginning on February 24, 2022, has caused widespread loss of human life and other loss to the citizens and residents of Ukraine, including loss of shelter, food, medical care, and jobs….The Department of the Treasury and the Internal Revenue Service are aware that employers may have adopted or may be considering adopting employer leave-based donation programs to aid citizens and residents of Ukraine; individuals working, traveling, or currently present in Ukraine; or refugees from Ukraine[.]”
Background. Under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to charitable organizations as described in Section 170(c) of the Internal Revenue Code (“Code”).
Notice. Under the Notice, leave-based donation payments made by an employer before January 1, 2023, to aid victims will not be treated as gross income or wages of the employees. Similarly, employees electing to forgo leave that funds the employer leave-based donation payments will not be treated as having been constructively received as gross income or wages.
Employers should not include the amount of employer leave based donation payments in Box 1, 3, or 5 of electing employees’ IRS Forms W-2.
Electing employees are not eligible to claim a charitable contribution deduction for the value of the donated leave. However, the employer may deduct qualified employer leave-based donation payments if the employer otherwise meets the requirements of the Code.
Notice 2022-28 can be found at: www.irs.gov/pub/irs-drop/n-22-28.pdf