Qualified “Employer Leave-Based Donation Payments” to Provide Tax Deductions for Employers

Earlier this year, the Department of Homeland Security declared Ukraine has been classified as a country under “Temporary Protected Status” due to the ongoing invasion by Russian forces. The IRS and Department of Treasury have noted many employers and employees are working together to provide aid to Ukrainian citizens, refugees, and forces through monetary donations. Accordingly, the IRS has provided a guide to the income tax treatment of these donations in the recent Notice 2022-28.

These donations are commonly being given as a part of employer leave-based donation programs in which employers allow their employees to exchange their personal leave, sick days, or vacation days for a cash donation made by the employer to a qualified Section 170(c) organization in support of Ukrainian relief efforts.

Under the direction of Notice 2022-28, donation payments made by employers as part of an employee leave-based donation program before January 1, 2023 will not count towards gross income or wages for employees and should not be included on the W-2 by employers. Further, if in accord with the rules of Sections 170 or 162, employers can deduct these donation payments. Employers with questions as to whether they or eligible to or how to execute a leave-based donation program should reach out to a profession for legal and professional guidance.