IRS Publishes Additional Guidance for Those Impacted by Hurricane Maria and the California Wildfires

Similar to action taken a few weeks ago in response to other recent disasters, the IRS recently published guidance containing certain relief for those individuals and businesses affected by Hurricane Maria and the 2017 California Wildfires.

The IRS offered extensions in relation to certain tax filing deadlines because of the California Wildfires (CA-2017-06). The extensions apply automatically to any individual or business in an area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Specifically, in California, individuals who reside or have a business in Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba Counties may qualify for tax relief. As a result, if a form was due on or after Oct. 8, 2017, and before Jan. 31, 2018, additional time to file the form through Jan. 31, 2018, is available. The relief would apply to quarterly payroll/employment/excise tax filings due, as well as for any employers that may have previously applied for a Form 5500 filing extension.

For retirement plans, IRS Announcement 2017-15 permits retirement plans to provide loans and hardship distributions for those impacted by Hurricane Maria and the California Wildfires, so long as certain requirements are met. Specifically, to be eligible for such a loan/distribution, on Sept. 16, 2017, in the case of the U.S. Virgin Islands; Sept. 17, 2017, in the case of Puerto Rico; or Oct. 8, 2017, in the case of California, the individual must have had a principal residence or place of employment in an area designated by FEMA for individual assistance due to these disasters. Alternatively, an individual is eligible if they have a lineal ascendant or descendant (i.e., grandchild, parent or grandparent), dependent or spouse with a principal residence or place of employment in the affected area. The loan/distribution must be made no later than March 15, 2018. While loans/distributions made pursuant to Announcement 2017-15 are excused from some IRS rules, others – including maximum amounts and other loan requirements – remain in place. Plans that want to make disaster-related loans/distributions have until the end of the first plan year beginning after Dec. 31, 2017, to make appropriate plan amendments.

Additionally, on Nov. 9, 2017, the IRS released Notice 2017-70, which provides guidance for the treatment of cash payments made by employers under leave-based donation programs to assist victims of the 2017 California Wildfires. This notice is similar to previous IRS guidance released for Hurricanes Harvey, Irma and Maria.

In general, under leave-based donation programs, employees may elect to forego sick, vacation or personal time off in exchange for cash payments the employer makes to charitable organizations. According to the notice, cash payments made under leave-based donation programs won’t constitute income or wages for employees as long as the payments are made to charitable organizations for the relief of the 2017 California Wildfires victims prior to Jan. 1, 2019.

Therefore, employers who participate in leave-based donation programs for the relief of the 2017 California Wildfires victims should work with their tax professional or tax counsel to determine applicable tax accounting and reporting.

Announcement 2017-15 »
Notice 2017-70 »
Tax Relief for Victims of Wildfires in California »