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Tax Breaks for Ebola Charity and Medical Expenses

The IRS released two notices (Notice 2014-65 and 2014-68) in late October that state the following:

President Obama has stated that the Ebola Virus Disease (EVD) outbreak in West Africa is a public health emergency, a humanitarian crisis, and a national security priority, and has directed U.S. agencies and departments… to assist West African governments in their responses… In view of the extreme need for charitable relief due to the EVD outbreak… employers may have adopted or may be considering adopting leave-based donation programs to aid victims of the EVD outbreak.

In response to the President’s statement, the IRS has designated EVD as a qualified disaster. As a result, “payments of qualified disaster relief to assist victims affected by the EVD outbreak in the three countries are excludable from the recipients’ gross income.” Notice 2014-65 states that “employer-sponsored private foundations may choose to provide disaster relief to employee victims of the EVD outbreak…”

Additionally, the IRS is allowing employees to donate their vacation, sick, or personal leave in exchange for employer cash payments made to organizations (who are tax-exempt) providing relief of the EVD outbreak in the countries of Guinea, Liberia, or Sierra Leone. Donations must be provided to qualifying charities before January 1, 2016 to receive the benefits outlined in Notice 2014-68. The IRS has made this type of ruling in the past; similar notices were created after 9/11, Hurricane Sandy, and Hurricane Katrina.

Similar rulings created great positive impact during the crises mentioned above. Allowing employees to donate their leave time will give individuals an additional avenue for charitable support to these organizations.Under this arrangement, an employee’s donated, unused leave will not be considered wages by the IRS. Therefore, even though the “donation” is not tax deductible by the employee, the value of the time will not be included in the employee’s gross income. So it is a win-win. For more detail, see the article in Accounting Today.

Click here to view Notice 2014-68, and here to view Notice 2014-65.

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

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