The invasion of Ukraine by the Russian Federation beginning on February 24, 2022 has caused widespread loss of human life and other loss to the citizens and residents of Ukraine.
On March 2, 2022, the President of the United States announced a continuation of the national emergency with respect to Ukraine because certain actions and policies of the Russian Federation threaten the peace, stability, sovereignty, and territorial integrity of Ukraine. On March 3, 2022, the Department of Homeland Security announced that it has designated Ukraine for Temporary Protected Status.
The IRS is aware that employers may have adopted or may be considering adopting employer leave-based donation programs to aid citizens and residents of Ukraine, individuals working or traveling or currently present in Ukraine, or refuges from Ukraine. The IRS has released new guidance on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the Russian invasion of Ukraine.
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 IRC section 170(c).
Under Notice 2022-28, employer leave based donation payments made by an employer before January 1, 2023 to a qualified charity to aid victims of the Russian invasion of Ukraine will not be treated as gross income or wages of the employees of the employer. Similarly, employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages. Employers should not include the amount of qualified employer leave-based donation payments in Box 1, 3, or 5 of the electing employees’ Form W-2. Electing employees are not eligible to claim a charitable contribution deduction for the value of the forgone leave that funds qualified employer leave-based donation payments.
An employer may deduct qualified employer leave-based donation payments as either a charitable contribution under IRC section 170, or as a business expense under IRC section 162, if the employer otherwise meets the respective requirements of either section of the Internal Revenue Code.