A little more than one year ago the IRS released Notice 2020-46 allowing employers to establish COVID-19 related leave donation programs for employees to participate in for their leave time to be converted to a cash donation to a charitable organization offering COVID-19 relief. The program was described in an article posted to this site at the time.[1] The guidance expired on December 31, 2020.

In Notice 2021-42[2] the IRS has retroactively extended the program through the end of 2021. The Notice describes the original program as follows:

Notice 2020-46, 2020-27 I.R.B. 7, provided guidance under the Internal Revenue Code (Code) on the federal income and employment tax treatment to employers and their employees of cash payments made before January 1, 2021, for the relief of victims of the COVID-19 pandemic in the affected geographic areas under employer sponsored leave-based donation programs. Under leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments made by their employers to charitable organizations described in section 170(c) of the Code (section 170(c) organizations).[3]

The Notice goes on to grant a formal extension of the program:

Because of the ongoing nature of the COVID-19 pandemic, the Department of the Treasury and the Internal Revenue Service have determined that it is appropriate to extend the treatment provided in Notice 2020-46 to cash payments made to section 170(c) organizations after December 31, 2020, and before January 1, 2022.

Accordingly, this notice extends the federal income and employment tax treatment provided in Notice 2020-46 to cash payments made to section 170(c) organizations after December 31, 2020, and before January 1, 2022, that otherwise would be described in Notice 2020-46.[4]

[1] Ed Zollars, “Tax Treatment for Programs for Donation of Employee Leave Time Value to COVID-19 Charities Described in IRS Notice,” Current Federal Tax Developments website, June 11, 2020, https://www.currentfederaltaxdevelopments.com/blog/2020/6/11/tax-treatment-for-programs-for-donation-of-employee-leave-time-value-to-covid-19-charities-described-in-irs-notice (retrieved July 1, 2021)

[2] Notice 2021-42, June 30, 2021, https://www.irs.gov/pub/irs-drop/n-21-42.pdf (retrieved July 1, 2021)

[3] Notice 2021-42, June 30, 2021

[4] Notice 2021-42, June 30, 2021