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Contributions Under Leave-Based Programs Not Income To Employee.

OCT. 24, 2001

Notice 2001-69; 2001-2 C.B. 491

DATED OCT. 24, 2001
Citations: Notice 2001-69; 2001-2 C.B. 491

Superseded and Modified by Notice 2003-1

Notice 2001-69


[1] In the aftermath of the September 11, 2001 terrorist attacks, a number of employers have adopted or are considering adopting leave-based donation programs, under which employees forgo vacation, sick, or personal leave in exchange for employer contributions of amounts to organizations described in section 170(c) of the Internal Revenue Code. This Notice provides interim guidance on the application of income and employment taxes to, and the proper reporting of, payments by employers under these programs. During the period covered by this interim guidance, the Internal Revenue Service and the Treasury Department intend to study whether it may be appropriate to modify the regulations under section 61 to address certain leave-based donation programs.


[2] Under general assignment-of-income tax principles, where, pursuant to an agreement or understanding, services are rendered to a person for the benefit of an organization described in section 170(c) and an amount for such services is paid to such organization by the person to whom services are rendered, the amount so paid constitutes income to the person performing the services. Section 1.61-2(c) of the Income Tax Regulations. See also Lucas v. Earl, 281 U.S. 111 (1930); Rev. Rul. 58-495, 1958-2 C.B. 27. Under general constructive receipt principles, when income is made available so that the taxpayer may draw upon it at any time, the income is constructively received by the taxpayer unless the taxpayer's control of its receipt is subject to substantial limitations or restrictions. Section 1.451-2(a). However, application of assignment-of-income and constructive receipt principles depends on the facts and circumstances of each case. See, e.g., Commissioner v. Giannini, 129 F.2d 638 (9th Cir. 1942).


[3] The Service will not assert that payments made by an employer to an organization described in section 170(c), in exchange for vacation, sick, or personal leave that the employee elects to forgo, constitute gross income or wages of an employee, PROVIDED that the payments are made to such organizations before January 1, 2003. Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees.

[4] Amounts to which this interim guidance applies need not be included in Box 1, 3 (if applicable), or 5 of the Form W-2.

[5] Participating employees may not claim a charitable contribution deduction under section 170 with respect to the value of forgone leave excluded from compensation and wages. In the case of an employer, the Service will not assert that payments made under such programs before January 1, 2003 are deductible under section 170, rather than under section 162.


[6] The Service and the Treasury Department invite comments on the taxation of leave-based donation programs, including comments on whether section 1.61-2(c) should be modified to except certain leave- based donation programs from the assignment-of-income doctrine, and on appropriate limitations to any such exception. Comments are also requested on the application of constructive receipt principles in connection with those programs. Finally, comments are requested on what types of leave-based donation programs employers currently offer.

[7] Comments may be submitted on or before February 1, 2002, to Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20224, Attn: CC:ITA:RU (Notice 2001-69), Room 5226. Submissions may also be sent electronically via the Internet to the following e-mail address: All materials submitted will be available for public inspection and copying.


[8] For further information, please contact Mr. Sheldon A. Iskow at (202) 622-4920 (not a toll-free call).

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