IRS Confirms Major Disaster Leave-Sharing Program Use for COVID-19 Pandemic

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On August 3, 2020, the IRS posted a short set of frequently asked questions for leave-sharing programs which confirm that major disaster leave-sharing programs under IRS Notice 2006-59 can be used for employees who have been adversely affected by the COVID-19 pandemic.  As a reminder, major disaster leave-sharing programs under Notice 2006-59 permit employees to donate paid leave to their co-workers who are adversely affected by a “major disaster.”  When properly structured, the donated leave is excluded from the gross income of the donor and included in the gross income of the recipient.  President Trump has declared major disasters due to COVID-19 for all 50 states and the District of Columbia.

Major disaster leave-sharing programs are one of three types of leave-sharing programs available to employers during the COVID-19 pandemic. Our previous SW Benefits Blog posts, “Two Leave-Sharing Program Options for Employers During the COVID-19 Pandemic” and “IRS Approves Additional Leave-Based Donation Programs for COVID-19 Relief” discuss these leave-sharing programs in detail.  Employers may want to consider consulting with counsel when setting up a leave-sharing program, as they are surprisingly complex and improper administration and documentation can result in negative tax and other consequences.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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