Employer Alternatives When Designing Disaster Relief Programs

Companies with employees in the Southern California area have several tax-advantageous alternatives when providing employees with disaster relief. This alert outlines the more common relief programs available under IRS guidance.

Section 139 Plan

This most direct arrangement is a program known as a "Section 139 Plan" in which the employer makes payments directly to the employee. Internal Revenue Code Section 139 allows employers to make payments for the benefit of an employee to reimburse or pay certain expenses not otherwise compensated for by insurance or otherwise.

These payments are not subject to federal employment tax (i.e., not taxable to the recipient) and are deductible to the employer under Section 162 if the following requirements are satisfied: