Grantmakers should be advised that Hurricane Sandy is a “qualified disaster” for federal tax purposes. Under IRS rules, this means that employers may more easily assist employees affected by the disaster. Employers and their related foundations may make payments for reasonable and necessary personal, family, living, or funeral expenses, and reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or its contents. Such payments will not be treated as taxable income to the affected employees.
Employers may provide assistance directly from the company, or to programs established for these purposes at a company-sponsored private foundation consistent with the rules outlined in IRS Publication 3833. In addition, employers may work with a public charity to establish a disaster relief fund at the charity for the purposes of making distributions directly to employees, even if the fund would normally be donor-advised. A special exemption under donor-advised fund rules allows employer-connected relief funds to make payments directly to impacted individuals during a qualified disaster, provided other criteria are met.