Leave-Based Donation Programs to Benefit Victims in Ukraine

Employers may have leave-based donation programs in which employees can choose to donate their unused leave time—vacation, sick, and personal days—for the use of other employees who’ve run out of paid leave. Usually, contributions of unused leave time are treated as taxable compensation. However, the IRS ruled that programs can be used to benefit victims of Russia’s attack in Ukraine with favorable results to employees and employers (Notice 2022-28). This is similar to the treatment granted in 2020 and 2021 for victims of COVID-19. Here are the rules:

• Employers must make cash donations to qualified charitable organizations to benefit victims in Ukraine before January 1, 2023; the donations are deductible by employers.
• Employees’ contributions to the program are not taxable and are not included on their W-2s.
• Employees may not claim any charitable contribution deduction.