Tax Relief for Leave-Based Donation Programs and Qualified Plan Distribution Extended to Hurricane Irma Victims

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September 18, 2017

The IRS recently announced favorable tax relief for “leave-based donation programs” designed to aid victims of Hurricane Irma, as well as easier access to funds in qualified retirement plans for these victims.  These forms of relief were provided to victims of Hurricane Harvey last month (see prior coverage), and as expected, were promptly extended to victims of Hurricane Irma.

Specifically, under Notice 2017-52, employees may forgo paid vacation, sick, or personal leave in exchange for cash donation the employer makes, before January 1, 2019, to charitable organization providing relief for the Hurricane Irma victims.  The IRS will not treat the donated leave as income or wages to the employee, and will permit employers to deduct the donations as business expenses.  Similarly, in Announcement 2017-13, the IRS extended to employees affected by Hurricane Irma the relaxed distribution rules announced following Hurricane Harvey for plan loans and hardship distributions from qualified retirement plans.  The relief generally permits plan sponsors to adopt amendments permitting plan loans and hardship withdrawals later than would otherwise be required to provide such options, waives the six-month suspension of contributions for hardship withdrawals, and allows the disbursement of hardship withdrawals and plan loans before certain procedural requirements are satisfied.

As we discussed with respect to Hurricane Harvey, employers looking to provide further relief to their employees have other long-standing options, as well.  For example, Notice 2006-59 provides favorable tax treatment similar to that provided under Notice 2017-52 for “leave-sharing plans” that permit employees to deposit leave in an employer-sponsored leave bank for use by other employees who have been harmed by a major disaster.  Additionally, section 139 permits individuals to exclude from gross income and wages any “qualified disaster relief payment” for reasonable and necessary personal, family, living, or funeral expenses, among others; and the payments may be made through company-sponsored private foundations (see our recent Client Alert on section 139 disaster relief payments).