Question:
I have been researching the following and would like to know what you think about the 2 items:
Donating PTO to another employee
Bereavement – we currrenty give 3 days – my old company use to do 3 days for in state and 5 days for out of state. I have found where companies are doing both of these – just wanted your opinion.
Answer:
There is a general tax law concept that the individual who earns paid time off and has the choice to receive it as income (use the time) or dispose of it (donate it) is still obligated to pay taxes on it. Therefore, any leave earned by one employee and donated to another would be taxable income to both parties. However, the Internal Revenue Service (IRS) allows for two exceptions in which leave can be donated without negative tax consequences to the donor.
A “medical emergency exception” is defined as a “medical condition of the employee or a family member that will require the prolonged/extended absence of the employee from duty and will result in a substantial loss of income to the employee due to the exhaustion of all paid leave available, apart from the leave-sharing plan.” See Private Ruling Letter, Rev. Rul. 90-29, 1990-1 C.B. 11.
A “major disaster exception” is defined as a disaster declared by the president under §401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act). Once the president declares a major disaster as stated above, the IRS allows leave donations to employees affected by the disaster without negative tax consequences to the donor(s). See IRS Notice 2006-59.
As for the leave for bereavement, I like the idea of 5 days if someone has to travel. Many employers are still on the 3-day/no-pay policy. But we are seeing more and more states requiring a set amount of leave that can be used for bereavement. In states with no laws, the company’s size often dictates the generosity of this leave.
I hope this helps.
Note: This blog post is for informational purposes only and should not be construed as legal advice. Always consult with a legal professional for advice specific to your situation.
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