July 28 2021

COVID-19 Pandemic: IRS Extends Tax Relief for 2021 Employer Leave-Based Donations

Source: IBFD Tax Research Platform News

The US Internal Revenue Service (IRS) has issued Notice 2021-42 to extend the tax relief for 2021 with regard to payments made by employers under leave-based donation programs to aid victims of the COVID-19 pandemic. The IRS has also issued a News Release (IR- 2021-142, 30 June 2021) accompanying the Notice.

Under the leave-based donation programs, initially provided in Notice 2020-46, employees can elect to forego vacation, sick or personal leave in exchange for cash payments that the employer makes to specified charitable organizations. Such payments will not be included in an employee's gross income, and that employers may deduct the payments as a business expense or as a charitable contribution deduction. Employees may not claim a charitable contribution deduction for the value of the foregone leave.

Notice 2020-46 granted the federal income and employment tax treatment for cash payments made to charitable organizations before 1 January 2021.

Notice 2021-42 extends the special tax treatment for cash payments made after 31 December 2020 and before 1 January 2022.