I hope readers are well. I have been minimizing blog posts lately, but I now plan on a few brief ones, not limited to executive compensation.
Since COVID-19 was designated as a disaster under the Stafford Act on March 13, 2020, it is escalated to that category of disasters that permit tax-free reimbursements by employers as a “Qualified Disaster Payment” under Internal Revenue Code Section 139. In addition to the individual tax benefit, the employer’s payments are fully deductible.
Under the Act, Section 139 provides that gross income does not include any amount received by an individual as a “Qualified Disaster Payment.” This includes payments by an employer, not otherwise reimbursed by insurance, to its employees, which are reasonably expected by the employer to:
- reimburse or pay reasonable and necessary personal, family, living or funeral expenses incurred as a result of a qualified disaster; and
- reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation or replacement is attributable to a qualified disaster.
-Mike Melbinger, CompensationStandards.com March 23, 2020
