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As employers cope with the COVID-19 pandemic, they may consider leave-sharing programs as a method to permit employees to donate paid leave to their coworkers. Leave-sharing programs that are properly structured under Internal Revenue Service (“IRS”) guidance permit exclusion of transferred leave from the gross income of a donor employee and inclusion of the transferred leave in the gross income of the coworker recipient. However, the IRS has generally limited this favorable tax treatment to leave-sharing programs for: (1) major disasters, and (2) medical emergencies.

1. Major Disaster Leave-Sharing Programs
   1. Eligible Employers

IRS Notice 2006-59 defines a “major disaster” as a major disaster as declared by the President under Section 401 of the Robert T. Read More ›