If your organization would like to allow employees to donate the value of their accrued paid leave to help Ukraine, you may do so, and for a while, the tax considerations are fairly lenient.
For this purpose, under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations described in section 170(c) of the Internal Revenue Code. Cash payments made by your company to these organizations under an employer leave-based donation program are referred to as “employer leave-based donation payments.”
To qualify, your payments must be made to a section 170(c) charitable organization to aid victims of the Russian invasion of Ukraine. Many well-meaning organizations might fall under this umbrella but do some diligent research first to be sure it aligns with the core values ofyour company.
Such payments made by employers before January 1, 2023, to section 170(c) charitable organizations to help Ukraine will not be treated as gross income or wages (or compensation, as applicable) ofthe employees.
Similarly, employees who choose to forgo their leave to help fund donations will not be treated as having received gross income or wages (or compensation, as applicable). Basically, it’s not considered taxable income.
You should not include the amount of these donation payments in Box 1, 3 (if applicable), or 5 of the employees’ Form W-2. Employees should be informed that they may not claim a charitable contribution deduction under section 170 for the value of the forgone leave that funds such leave-based donation payments.
You, as an employer, may deduct leave-based donation payments under the rules of section 170 or the rules of section 162 if you otherwise meet the respective requirements of either section ofthe tax code.
Any specific tax questions should always be addressed with knowledgeable counsel or your taxprofessional.
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