Echoing the guidance provided back in 2005 in the aftermath of Hurricane Katrina, the IRS has published Notice 2012-69 to support leave-based donation programs for the relief of the victims of Hurricane Sandy. Leave-based donation programs allow employees to elect to forego vacation, sick, or personal leave in exchange for cash payments made by their employers to charitable organizations engaged in specified relief or charitable efforts.
Notice 2012-69 confirms that the IRS will not assert that the payments made by an employer to a charitable organization in exchange for the vacation, sick, or personal time foregone by an employee constitutes gross income to the employee IF: (1) the payment is made to an organization for purposes of the relief of the victims of Hurricane Sandy; (2) the organization meets the requirements of Section 170(c) of the Internal Revenue Code; and (3) the payment is made before January 1, 2014. Organizations exempt from tax under Section 501(c)(3) generally meet the requirements of Section 170(c). Needless to say, electing employees may not claim a charitable contribution deduction with respect to the value of foregone leave excluded from compensation and wages.