IRS Provides Disaster Relief Guidance for Victims of Hurricane Sandy
The IRS announced that it is treating Hurricane Sandy as a qualified disaster and as a result, there is some favorable tax treatment that we wanted to report. Many individuals and companies want to provide assistance to the victims of Hurricane Sandy through charitable giving, and so the IRS has provided the following guidance:
- Relief payments are not taxable income: Usually cash payments from an employer to an employee are considered taxable income. The IRS guidance provides that if an employer or any person makes a relief payment to a victim of Hurricane Sandy, the payment will not be considered taxable income to the individual. Qualifying relief payments can be for amounts to cover necessary personal or family expenses that are not covered by insurance and include payments to assist with repairing personal residences or replacing contents of personal residences. Furthermore, this guidance allows an employer sponsored private foundation to provide relief to employees of that employer-sponsor and such will not constitute an act of self-dealing, which otherwise would cause the foundation to be subject to onerous penalty taxes. For more information see http://www.irs.gov/uac/Hurricane-Sandy-Qualified-Treatment-of-Payments.
- Employee Leave programs: If an employee forgoes, vacation, sick or personal leave time and the employer makes a cash donation to a state or local government or a charity for relief of victims of Hurricane Sandy, then the individual will not recognize income and the employer will be able to take a charitable contribution deduction for the cash paid. These amounts must be paid to the relief organization before January 1, 2014. Only the employer gets the charitable deduction, not the employee. See http://www.irs.gov/pub/irs-drop/n-12-69.pdf.
- Expedited treatment for Applications for Exemption: For new organizations that have been formed to provide relief to the Hurricane Sandy victims, the IRS will grant expedited review of applications for exemption for those organizations. Applicants should write “Disaster Relief” on the top of the application. If you have already submitted an application for exemption for a disaster relief organization, you can fax a letter to IRS with the organization’s taxpayer ID number on it to ask for the expedited treatment. For more information see http://www.irs.gov/uac/Newsroom/IRS-Expedites-Charity-Applications-and-Urges-Use-of-Existing-Charities.
- Extended due dates for tax returns: Finally, as previously reported on our blog, nonprofit organizations in the zones declared disaster areas have an extension for filing Form 990s that were due on November 15, 2012. The extended due date is February 1, 2013.