Why is the qualified disaster designation important?
Legislation passed after September 11, 2001 (the Victims of Terrorism Tax Relief Act of 2001) defined qualified disasters and made it easier for corporations and corporate grantmakers to provide assistance in such situations. First, the legislation provided that qualified disaster relief payments (defined below) do not count as wages or other income and recipients do not have to pay income taxes on them. Second, the act’s legislative history directed the IRS to issue new guidance permitting company foundations to provide disaster relief to company employees, as long as certain safeguards are in place. IRS Publication 3833 includes the IRS response: As long as the disaster is a qualified disaster and specified criteria are met, a company foundation may offer disaster relief to employees.
