Disaster relief requirements.

• Author: Smith, Annette B.
• Position: Employer-sponsored assistance programs and charitable relief

In light of the Sept. 11, 2001 terrorist attack and subsequent anthrax attacks, the IRS released a special publication titled Disaster Relief: Providing Assistance Through Charitable Organizations. The publication provides important guidance on employer-sponsored assistance programs, as well as on the special rules enacted in the Victims of Terrorism Tax Relief Act of 2001 (VTTRA) that apply to charities providing relief to attack victims.

Previously, a considerable debate had ensued as to the circumstances under which employer-sponsored assistance programs could result in inurement, private benefit or self-dealing that could affect an organization's tax-exempt status or result in imposition of excise taxes. In addition, after media attention concerning eligibility for aid as a result of the September 11 attacks, several charitable organizations made inquiries about how to distribute funds to victims. The information provided by the Service in its new publication seems to clarify somewhat the standards by which employer-sponsored assistance programs and September 11 disaster-relief programs will be judged.

Employer-Sponsored Programs

When natural or civil disasters take place that affect employees, many employers want to reach out to their employees and their employee's families by providing financial aid through a charitable organization. Employers can provide such support through public charities or private foundations; however, public charities can provide a broader range of assistance. A private foundation that is employer-sponsored is limited to making "qualified disaster" relief payments. The IRS has defined that term to include a disaster that results from terroristic or military actions, a Presidentially declared disaster, a disaster that results from an accident involving a common carrier or any other event that the Service determines as catastrophic. Public charities, however, can generally establish employer-sponsored assistance programs to respond to any disaster or employee hardship, including illness, death or other personal events.

Employers and the charitable organizations with which they work are encouraged to take steps to ensure that the organization's provision of aid to employees will be consistent with the organization's charitable purposes. In its new publication, the IRS explains that if the employer and sponsor and the employee (or the employee's family members) meet certain requirements, it will presume that...