Companies May Pay Cash or Employee Benefits, Tax-Free, to Employee Victims of Superstorm Sandy
Employers can provide benefits, tax-free, under tax code Section 139 and Revenue Ruling 2003-12 to employees who are victims of Superstorm Sandy. And, there is essentially no administration involved for the employer to be able to take advantage of this type of plan.
Section 139 provides that, in the case of a presidential declared disaster, an employer can provide cash or benefits to assist employees. The payments are exempt from federal income tax and employment taxes, no substantiation is required from the employees, and the employer is able to deduct the payments.
The Victims of Terrorism Tax Relief Act of 2001 added Section 139 to the tax code. Section 139(a) provides that gross income does not include any amount received by an individual as a qualified disaster relief payment. “Qualified disaster relief payment” and “qualified disaster” are defined Section 139(b) and guidance, including examples of programs meeting the exclusion, is provided in the revenue ruling. IRS Publication 3833 provides additional guidance for employers and individuals.
President Obama has declared Superstorm Sandy to be a major disaster for the following counties: Bronx County, Kings County, Nassau County, New York County, Queens County, Richmond County and Suffolk County.