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Notice 2020-46: Employer leave-based donation programs (COVID-19)

Employer leave-based donation programs (COVID-19)

The IRS today released an advance version of Notice 2020-46 as guidance for employers whose employees forgo sick, vacation or personal leave because of the coronavirus (COVID-19) pandemic.


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Notice 2020-46 [PDF 16 KB] provides that cash payments that an employer makes to section 170(c) organizations in exchange for vacation, sick or personal leave that the employees elect to forgo will not be treated as wages (or compensation) to the employees (or otherwise be included in the gross income of the employees) if the payments are:

  • Made to the section 170(c) organizations for the relief of victims of the COVID-19 pandemic in the affected geographic areas, and
  • Paid to the section 170(c) organizations before January 1, 2021.

The IRS notice further provides that employees electing to forgo leave will not be treated as having constructively received gross income or wages (or compensation).

The amount of cash payments under Notice 2020-46 are not to be included in Box 1, 3 (if applicable), or 5 of the Form W-2.

Electing employees cannot claim a charitable contribution deduction under section 170 with respect to the value of forgone leave.

An employer may deduct these cash payments as a business expense (under the rules of section 170 or the rules of section 162) if the employer otherwise meets the respective requirements of either section.

Read a related IRS release—IR-2020-119 (June 11, 2020).

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