How to donate PTO and help COVID-19 victims

By: Michelle Higgins

Publication: Benefits & Compensation Regulatory Alert

Date Posted: 08/27/2020

Donating PTO for victims during Covid-19

The Internal Revenue Service (IRS) recently issued a notice that provides guidance on how employers may make cash donations to help victims of the ongoing COVID-19 through leave-based donation type programs (such as PTO). Essentially, this turns vacation time into charitable funds.

Employers may already have (or are considering) leave-based donation programs. Under these programs, employees can choose to forgo their own vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations.

According to the Internal Revenue Code on the federal income and employment tax treatment, cash payments employers make in these circumstances will not be treated as wages (or compensation) or be included in employees’ gross income, as long as the payments are:

(1) made to section 170(c) organizations (i.e., nonprofit or charitable groups) for the relief of victims of the COVID-19 pandemic in an affected area; and

(2) paid to the charitable organizations before January 1, 2021.

Similarly, employees who elect to forgo leave will not be treated as having received gross income or wages (or compensation, as applicable). In other words, they won’t be taxed on it. However, employees who choose to contribute their PTO cannot claim a charitable contribution deduction with respect to the value of the forgone leave.

Employers, however, may deduct these cash payments as applicable if they otherwise meet the requirements.

About the author
Michelle Higgins - Human Resources Editor

Michelle Higgins is an Associate Editor on the Human Resources Publishing Team and she creates content on a variety of employment-related topics including benefits, compensation, overtime, wage deductions, exempt/nonexempt employees, health and retirement plans, independent contractors, and child labor.

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