February 24, 2021

Helping After Crisis: Employers Can Provide Employees Tax Free Relief With Qualified Disaster Relief Payment

Client Alert
Tyree C. Collier | Katie Erin Gerber | Todd Denison Keator | Kate Minnich | David M. Rosenberg

When a disastrous event impacting a significant number of people occurs, our collective instinct often is to donate funds to charitable organizations working to provide support to the victims of the event. In many cases, an employer may be in an ideal position to help provide such relief swiftly to its employees but payments by an employer to employees generally are treated as taxable compensation. However, under Section 139 of the Internal Revenue Code, employers can provide their employees “qualified disaster relief payments,” and the payments will not constitute compensation for tax purposes. An employer may also help by establishing a charitable organization to make qualified disaster relief payments to its employees, which allows employees and others to make tax-deductible charitable contributions to help support the relief program. Further, if the charitable organization is classified as a public charity, the charitable organization will have the option to provide relief to employees in connection with emergency hardship circumstances beyond the scope of hardships that qualify for qualified disaster relief payments.

READ: Helping After Crisis: Employers Can Provide Employees Tax Free Relief With Qualified Disaster Relief Payment

Related Insights