Arlington, Va. (Mar. 19, 2020) The Professional Services Council (PSC) called on the Internal Revenue Service (IRS) to allow employers to establish leave sharing programs to aid employees affected by Coronavirus Disease 2019 (COVID-19) and to not subject the employee donating leave to taxation on the donation. In a letter sent to the IRS on March 17, PSC urged the IRS to establish leave sharing programs as soon as possible, especially given the potential severity of the disruption COVID-19 may cause on the workforce. PSC’s goal is to see that employers and charitable organizations receive and deploy the full value of donated leave, rather than just the net after-tax amount.

“The public health crisis as a result of the COVID-19 outbreak necessitates a review of IRS policies regarding donated leave for the private sector. Federal employees have access to voluntary leave bank and voluntary leave transfer programs,” said PSC Executive Vice President and Counsel Alan Chvotkin. “IRS should allow private-sector employers and their employees the same flexibilities to minimize the impact of the COVID-19 virus on affected individuals.”

Many companies are considering allowing employees to elect to relinquish vacation, sick, or personal leave either to give directly to fellow employees who have exhausted their accrued personal leave or in exchange for cash payments that the employer would make to qualified charitable organizations that would provide charitable relief. Under general tax rules, an employee who elects to give donated leave is nonetheless subject to tax withholding.

“The IRS has provided exceptions to this general rule for employers who offer leave-sharing plans for their employees who suffer medical emergencies or experience natural disasters. There may be other variations of these employee leave-sharing programs that IRS has implemented in the past and should be encouraged and that would benefit from the same tax treatment,” Chvotkin continued. “We urge the IRS to be as flexible as possible in providing for this treatment to lessen any undue burden on employees during this uncertain time.”