January 10, 2002 | Read Time: 1 minute
Corporate foundations would be able to provide direct financial assistance to employees of the company or their families who suffered losses as the result of a disaster, under legislation passed by Congress last month.
The legislation was prompted by a desire to help corporate funds make grants to employees and their families dealing with the aftermath of September 11. It was included in a bill known as the “Victims of Terrorism Relief Act of 2001,” which would also reduce estate and income taxes for the families of victims killed in the September 11 attacks.
Under the legislation, companies may use their foundations to provide disaster-relief assistance — whether as a result of September 11 or of some future disaster — to their employees, nullifying an Internal Revenue Service policy that has prohibited such aid since 1999. Before making payments, however, companies would have to come up with an objective way to determine that the employee or family members faced a hardship and deserved help.
Employees would not be required to pay income or employment taxes on the money they received from the corporate foundation.
In its 1999 ruling, the IRS said payments to employees by a corporation’s foundation would not qualify as charitable awards because the payments benefited the company — making it easier for a business to attract and retain workers.
The bill, which President Bush is expected to sign, also would assist companies that have set up September 11 relief funds at existing charities. Such funds have to play by the same rules as corporate foundations unless they receive more than one-third of their money from the public.
