About two weeks before the wildfires struck northern California, my wife and I spent a few days in Napa Valley. We went to a stunning estate to celebrate the perfect nuptial ceremony featuring a beautiful bride. There aren’t many places more gorgeous than California wine country. My friends there tell me that still is true, despite the fires. However, a lot of folks have lost their homes and their jobs. People are helping. Also, the IRS is doing its part.
Yesterday, the IRS released Notice 2017-70 that provides guidance on the treatment of leave-based donation programs to aid victims of the California wildfires.
Under a leave-based program, employees elect to forgo vacation, sick or personal leave and the employer makes contributions of such forgone amounts to a charitable organization that, in this case, helps victims of the 2017 California wildfires. There are some tough questions about taxation of such programs, when one looks at underlying law and authorities. One could certainly project all kinds of adverse tax results of people trying to do good deeds.
If the IRS were to stick to the letter of the law, a lot of money intended for victims might go into the coffers of the Treasury, instead of to the charities helping the victims. But, the IRS is turning away from a strict interpretation and, without citing any authority (of which there is probably none), outlines for the employees and employers a best-case scenario. It is simply the case of the Federal government, through the IRS, doing the right thing; forget about the rules.
This is not the first time that the IRS has performed a kind act. Over the last several years I have observed a number of these types of pronouncements and actions that aided victims of all sorts by loosening the strictures of tax law. For example, in the aftermath of the recent hurricanes, the IRS extended many deadlines for filing returns and paying taxes; it set up and manned hotlines to help victims and tax preparers serving those victims.
Most of my dealings with the IRS are ministerial. However, some of my dealings are respectfully adversarial. The IRS interprets the law to be sure that my clients pay no less than they should and I am interpreting the law to be sure that my clients pay no more than they should. Sometimes, the twain do not easily intersect.
Today, though, my hat’s off to the IRS. Well done, Revenuers.