Tax Exempt and Government Entities

EXEMPT ORGANIZATIONS

DISASTER Relief,

P R O V I D I N G 

A S S I S T A N C E 

T H R O U G H 

C H A R I T A B L E 

ORGANIZATIONS ,
ii

TABLE o f Contents,

Helping Through an Existing Charitable Organization, .................... 3,

Federal Tax Law, ............................................................... 3,

State Law Considerations, ...................................................... 3,

Establishing a New Charitable Organization, ................................ 4,

Applying for Tax-Exempt Status, ............................................... 4,

Employee Identification Number (EIN), ........................................ 5,

Expedited Processing of Applications for Exemption, .......................... 5,

Public Charity vs. Private Foundation, ......................................... 7,

How Charitable Organizations Help Victims, ................................ 8,

Aid to Individuals, .............................................................. 8,

Aid to Businesses, .............................................................. 8,

Charitable Class, ................................................................ 9,

Needy or Distressed Test, ...................................................... 11,

No Automatic Right to Charity Aid,........................................... 11,

Short-Term and Long-Term Assistance, ...................................... 12,

Documentation, .................................................................. 13,

Documentation of Short-Term Emergency Aid, ............................... 13,

Reporting, ......................................................................... 14,

Income Tax Treatment of Qualified Disaster Payments, ...................... 14,

Employer-Sponsored Assistance Programs, ............................... 15,

Employer-Sponsored Public Charities, ........................................ 16,

Employer-Sponsored Donor Advised Funds, .................................. 17,

Employer-Sponsored Private Foundations, .................................... 17,
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Special Tax Rules for Recipients of Disaster Relief Assistance, ....... 20,

Charitable Organizations, ..................................................... 20,

Federal and State Government, ............................................... 20,

Direct Assistance from Employers and Other Sources, ....................... 21,

Gifts and Charitable Contribution Rules, ................................... 22,

Charitable Contributions, ..................................................... 22,

Foreign Contributions, ........................................................ 23,

Gifts, .......................................................................... 24,

Additional Help on Disaster-Related Topics, ............................... 25,

Forms and Publications, ...................................................... 25,

Telephone Assistance, ........................................................ 25,
1

DISASTER Relief,

P R O V I D I N G A S S I S T A N C E 

THROUGH CHARITABLE ORGANIZATIONS ,

This publication is for people interested in assisting victims of disasters or those in 

emergency hardship situations through tax-exempt charities. Charitable organizations 

have traditionally been involved in assisting victims of disasters such as floods, fires, riots, 

storms or similar large-scale events. Charities also play an important role in helping those 

in need because of a sudden illness, death, accident, violent crime or other emergency 

hardship. This publication includes:

n advice about helping to provide relief through an existing charitable organization,

n information about establishing a new charitable organization,

n guidance about how charitable organizations can help victims,

n documentation and reporting requirements,

n guidance about employer-sponsored assistance programs,

n information about tax treatment of disaster relief payments,

n information about gifts and charitable contribution rules, and

n reference materials and taxpayer assistance resources.

By using this publication as you begin to plan your relief efforts, you will be able to ensure 

that your program will assist victims in ways that are consistent with the federal tax rules 

that apply to charities.
2

Providing aid to relieve human suffering caused by a natural or civil disaster or an emergency 

hardship is charity in its most basic form. Charitable organizations, including churches, are 

frequently able to administer relief programs more efficiently than individuals acting on their 

own. Charitable organizations can continue to offer assistance over long periods. Even if the 

charity later dissolves, its remaining assets are permanently dedicated to accomplishing charitable purposes and cannot be divided among the organization’s members, directors or employees.

Of course, there are tax advantages when a tax-exempt charitable organization provides relief. 

If an organization is exempt from federal income tax, it can use more of its resources to further 

its mission. Contributors to qualified charitable organizations may be eligible to claim tax 

deductions for their donations, and the value of these contributions is not subject to gift tax, 

regardless of the amount. Also, individuals receiving assistance are not generally subject to 

federal tax on the value of assistance they receive from a charity to meet their personal needs.
3

H E L P I N G T H R O U G H A N E X I S T I N G 

CHARITABLE ORGANIZATION ,

When a tragic event occurs there is often an overwhelming desire on the part of the community 

to come to the aid of the victims. In the immediate aftermath of a disaster or emergency, those 

who wish to provide help may overlook existing charities and spend precious time and resources 

establishing a new charitable organization and applying for tax-exempt status.

As an alternative, it may be more practical to combine resources with an existing charity to 

provide immediate relief, or see whether an existing charity operating in a related area may be 

interested in establishing a special program to address a particular disaster or emergency hardship situation. For instance, a community fund like the United Way, a religious organization like 

the Salvation Army, or a relief organization like the Red Cross are all existing organizations 

which have provided targeted disaster relief and emergency hardship assistance in response to 

natural and civil disasters and other unforeseen emergencies. Community-based organizations 

and charities with a local presence often know best what assistance is needed and understand 

the social and cultural context of a disaster. Working with and supporting these existing 

organizations may prove to be a more efficient use of disaster relief resources.

Furthermore, even if a charity was not specifically organized to provide disaster relief and such 

activities were not specified in its application for exemption, an existing recognized charity may 

engage in disaster relief activities without obtaining prior permission from the IRS. However, 

it must report this new activity on its annual return and may wish to report a change in its 

activities to the IRS Exempt Organizations Determinations Office.

FEDERAL TAX LAW,

Under federal law, an existing qualified charity generally must be given full control and 

authority over the use of donated funds, and contributors may not earmark funds for the 

benefit of a particular individual or family. Contributions to qualified charities may, however, 

be earmarked for flood relief, hurricane relief or other disaster relief.

STATE LAW CONSIDERATIONS ,

Some contributors are reluctant to contribute to an existing umbrella organization with many 

programs. They are concerned that their donations will not be spent directly to serve the 

victims of the particular emergency they wish to help, and instead, will be applied to other 

organizational expenses.

To address these concerns, many state and local authorities that regulate charitable solicitation 

rules have imposed regulations that provide that, if a charity represents that funds will be used 

for the relief of the victims of a particular disaster, the funds may not be used for other programs 

of the organization. Charitable organizations and contributors should be aware of the solicitation 

rules that may apply in their particular jurisdiction.
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E S T A B L I S H I N G A N E W 

CHARITABLE ORGANIZATION ,

When no existing charity appears to have the capability to carry out an effective disaster relief 

or emergency hardship program, or when the potential organizers of the charity have long-term 

goals extending beyond the immediate crisis, it may be appropriate to consider establishing a 

new charitable organization. An organization qualifies as an exempt charitable organization if it 

is organized and operated exclusively for charitable purposes, serves public rather than private 

interests, and refrains from participating or intervening in any political campaign or engaging in 

substantial amounts of lobbying activity.

APPLYING FOR TAX-EXEMPT STATUS ,

Generally, a new charitable organization with actual or anticipated annual gross receipts in 

excess of $5,000 must submit an application for exemption and be recognized as tax exempt by 

the IRS. There are exceptions to this general rule. Churches, synagogues, temples, and mosques 

may, but are not required to, apply for tax-exempt status from the IRS.

You may wish to consult the IRS website at www.irs.gov and review the following IRS resources 

when establishing a charitable organization:

Life Cycle of a Public Charity/Private Foundation,

These life cycles, which can be accessed at www.irs.gov/charities, contain links to helpful information about points of intersection between disaster relief organizations and the IRS, including 

access to explanatory information and forms that organizations may need to file with the IRS.

Publication 4220, Applying for 501(c)(3) Tax-Exempt Status,

This publication provides information about eligibility for section 501(c)(3) status, how to apply 

for tax-exempt status, and the responsibilities of section 501(c)(3) organizations.

Form 1023, Application for Recognition of Exemption 

Under Section 501(c)(3) of the Internal Revenue Code,

Applicants for tax-exempt status under section 501(c)(3) generally must file Form 1023.

Form 1023-EZ, Streamlined Application for Recognition of Exemption 

Under Section 501(c)(3) of the Internal Revenue Code ,

Organizations with annual revenues of $50,000 or less and assets of $200,000 or less may 

file the interactive Form 1023-EZ. It’s three pages and must be filed online. An organization 

not eligible to file Form 1023-EZ must use Form 1023. 

Publication 557, Tax-Exempt Status for Your Organization,

This publication describes basic requirements to qualify as a tax-exempt charitable organization 

and the application process.
5

EMPLOYEE IDENTIFICATION NUMBER (EIN),

An organization must obtain an employer identification number before it applies for tax-exempt 

status. An EIN is an organization’s account number with the IRS. It should be used on all correspondence with the IRS and must be entered on application forms as well as annual information 

and tax returns.

You can apply for an EIN:

n Online by clicking on the Employer ID Numbers link at Tax Information For Businesses. 

The EIN is issued immediately once the application information is validated. (Certain 

organizations, including those with a foreign address and certain limited liability companies 

may not file online.) This is the preferred application method.

n By telephone at (800) 829-4933. International applicants must call (267) 941-1099. An assistor 

will provide the number to an authorized party by phone.

n By faxing or mailing a completed Form SS-4, Application for Employer Identification Number, 

to the fax numbers or address specified in the form instructions. The form and instructions are 

available on www.irs.gov or by calling (800) 829-3676.

If you have already applied for an EIN and have not yet received it, or you are not sure 

whether you have an EIN, call our toll-free customer account services number, (877) 829-5500, 

for assistance.

E X P E D I T E D P R O C E S S I N G O F 

APPLICATIONS FOR EXEMPTION ,

Normally, a Form 1023 is processed in order based upon the date it is received; however, a 

new disaster relief or emergency hardship organization may request expedited handling of its 

application. An organization should only request expedited handling of its application if there is 

a compelling reason for the IRS to approve such a request. An application will not be expedited 

simply because the organization may serve disaster victims. The organization must demonstrate 

that it is meeting an immediate need of disaster relief or emergency hardship victims and that 

its ability to provide immediate assistance to such victims will be adversely impacted in a 

material way if the application is not reviewed expeditiously. Requests for expedited handling 

are infrequently approved, and even if consideration of the application is expedited, there is 

no guarantee that tax-exempt status will be granted.

The request for expedited processing should accompany the application and user fee, 

and should include:

n a compelling reason to process the application ahead of others,

n a brief description of the disaster and details of how the organization will provide relief,

n an explanation of the immediate need for the specific disaster relief services the 

organization provides,
6

n a description of any pending grants, including information about the grantor and the 

amount or property to be received,

n an explanation of how the loss of the grant(s) might impact the organization’s ability 

to operate and provide relief,

n a description of any significant business emergency (such as an impending deadline 

imposed by a court or government agency) demonstrating that the business emergency 

will significantly impact the applicant’s ability to operate and explaining how expediting 

the application will enable the applicant to avoid the emergency,

n a statement explaining any other anticipated consequences should the expedited

 processing be denied, and ,

n the date an exemption letter is required, if applicable.

The following examples demonstrate the types of situations in which a request for the 

expeditious handling of an application for exemption would be appropriate or inappropriate.

EXAMPLE ,

An organization has a matching grant pending that would double the 

funds it has available to provide immediate counseling for children 

directly affected by an earthquake. The organization can only receive the 

funds if it can prove that it is exempt under section 501(c)(3). Expediting 

the processing of the application under these circumstances is appropriate because the organization would otherwise lose this significant grant 

money that is to be used to provide counseling to children at a time 

when they most need it.

EXAMPLE ,

An organization plans to raise funds to be used to erect a monument to 

victims of a plane crash. Certain businesses and members of the general 

public have expressed interest in contributing to the project; however, 

there are no firm commitments for funding. While the organization intends 

to honor disaster victims, it is not providing disaster relief. Furthermore, 

there is no evidence that there are any significant grants pending or 

any other business reason to expedite consideration of the application. 

Expedited treatment of the application would not be appropriate.
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PUBLIC CHARITY VS. PRIVATE FOUNDATION ,

Every exempt charitable organization is classified as either a public charity or a private 

foundation. Generally, organizations that are classified as public charities are those that:

n are churches, hospitals, schools, and qualified medical research organizations affiliated with 

hospitals, schools, colleges and universities;

n have an active fundraising program and normally receive a substantial part of their support in 

the form of contributions from publicly supported organizations, governmental units, and/or 

from the general public;

n normally receive not more than one-third of their support from the sum of gross investment 

income and the excess (if any) of unrelated business taxable income over the tax imposed on 

that income; and normally receive more than one-third of their support from contributions, 

membership fees, and gross receipts from activities related to their exempt functions; and

n support other public charities.

Because public charities typically solicit funds from the general public and are generally 

subject to more public scrutiny and oversight in their daily operations, they are less restricted 

in the type of disaster assistance and emergency hardship relief they may provide than private 

foundations. See Employer-Sponsored Assistance Programs, page 15.

Private foundations, in contrast, typically have a single major source of funding (usually gifts 

from one family or corporation), rather than funding from many sources. Many have as their 

primary activity the making of grants to other charitable organizations and individuals, rather 

than the direct operation of a charitable program.

Classification as a public charity or private foundation is important because different tax rules 

apply to the operations of each. Deductibility of contributions to a private foundation is more 

limited than deductibility of contributions to a public charity. In addition, private foundations 

are subject to excise taxes, including taxes on acts of self-dealing. For example, it is self-dealing 

if the income or assets of a private foundation are used by or for the benefit of a substantial 

contributor to the foundation or a person in control of the foundation, and the benefit is not 

incidental or tenuous.

Publication 557, Tax-Exempt Status for Your Organization, explains some of the distinctions 

between public charities and private foundations. See also the Life Cycle of a Public Charity 

and the Life Cycle of a Private Foundation at www.irs.gov/charities. 
8

H O W C H A R I T A B L E O R G A N I Z A T I O N S 

HELP VICTIMS ,

Charitable organizations can serve disaster victims and those facing emergency hardship 

situations in a variety of ways.

AID TO INDIVIDUALS ,

Organizations may provide assistance in the form of funds, services, or goods to ensure 

that victims have the basic necessities, such as food, clothing, housing (including repairs), 

transportation, and medical assistance (including psychological counseling). The type of aid 

that is appropriate depends on the individual’s needs and resources. Disaster relief organizations are generally in the best position to determine the type of assistance that is appropriate.

For example, immediately following a devastating flood, a family may be in need of food, 

clothing, and shelter, regardless of their financial resources. However, they may not require 

long-term assistance if they have adequate financial resources. Individuals who are financially 

needy or otherwise distressed are appropriate recipients of charity. Financial need and/or 

distress may arise through a variety of circumstances. Examples include individuals who are:

n temporarily in need of food or shelter when stranded, injured, or lost because of a disaster;

n temporarily unable to be self-sufficient as a result of a sudden and severe personal or family 

crisis, such as victims of violent crimes or physical abuse;

n in need of long-term assistance with housing, childcare, or educational expenses because of a 

disaster; and,

n in need of counseling because of trauma experienced as a result of a disaster or a violent crime.

AID TO BUSINESSES ,

Disaster assistance may also be provided to businesses to achieve the following charitable 

purposes:

n to aid individual business owners who are financially needy or otherwise distressed, 

n to combat community deterioration, and,

n to lessen the burdens of government.

An exempt charity can accomplish a charitable purpose by providing disaster assistance to 

a business if:

n the assistance is a reasonable means of accomplishing a charitable purpose, and,

n any benefit to a private interest is incidental to the accomplishment of a charitable purpose.
9

Once a damaged business has been restored to viability or a newly attracted business is 

self-supporting, further assistance from a charity is no longer appropriate. Charities that aid 

businesses should have criteria and procedures in place to determine when aid should be 

offered and discontinued.

EXAMPLE ,

As a result of a tornado, the central business district of a community is 

severely damaged. Because of the devastation, the area has become 

blighted. No single business wants to begin restoration efforts until 

it can be assured that the whole business district will be restored. A 

charity may provide funds to begin rebuilding the infrastructure of the 

district, such as roads, sidewalks, parks, sewers and power lines. This 

type of assistance would accomplish a charitable purpose by combating 

community deterioration. Any benefit to the business is incidental to the 

public purpose accomplished by the charity’s program of assistance to 

the community.

CHARITABLE CLASS ,

The group of individuals that may properly receive assistance from a tax-exempt charitable 

organization is called a “charitable class.”

A charitable class must be large enough or sufficiently indefinite that the community as a 

whole, rather than a pre-selected group of people, benefits when a charity provides assistance. 

For example, a charitable class could consist of all the individuals in a city, county or state. 

This charitable class is large enough that the potential beneficiaries cannot be individually 

identified and providing benefits to this group would benefit the entire community.

If the group of eligible beneficiaries is limited to a smaller group, such as the employees of 

a particular employer, the group of persons eligible for assistance must be indefinite. To be 

considered to benefit an indefinite class, the proposed relief program must be open-ended and 

include employees affected by the current disaster and those who may be affected by a future 

disaster. Accordingly, if a charity follows a policy of assisting employees who are victims of all 

disasters, present or future, it would be providing assistance to an indefinite charitable class. If 

the facts and circumstances indicate that a newly established disaster relief program is intended to benefit only victims of a current disaster without any intention to provide for victims of 

future disasters, the organization would not be considered to be benefiting a charitable class.
10

Because of the requirement that exempt organizations must serve a charitable class, a taxexempt disaster relief or emergency hardship organization cannot target and limit its assistance 

to specific individuals, such as a few persons injured in a particular fire. Similarly, donors 

cannot earmark contributions to a charitable organization for a particular individual or family.

EXAMPLE ,

Linda’s baby, Todd, suffers severe burns in a fire requiring costly 

treatment that Linda cannot afford. Linda’s friends and co-workers 

form the Todd Foundation to raise funds from fellow workers, family 

members, and the general public to meet Todd’s expenses. Because 

the organization is formed to assist a particular individual, it would 

not qualify as a charitable organization.

Consider this alternative case: Linda’s friends and co-workers form an 

organization to raise funds to meet the expenses of an open-ended 

group consisting of all children in the community injured by disasters 

where financial help is needed. Neither Linda nor members of Linda’s 

family control the charitable organization. The organization controls 

the selection of aid recipients and determines whether any assistance 

should be provided to Todd. Potential donors are advised that, while 

funds may be used to assist Todd, their contributions might well be 

used for other children who have similar needs. The organization 

does not accept contributions specifically earmarked for Todd or any 

other individual. The organization, formed and operated to assist an 

indefinite number of current and future disaster victims, qualifies as 

a charitable organization.

See the example in the section on Gifts and Charitable Contribution 

Rules, page 24, for a situation where providing disaster assistance 

apart from a qualified charity is desirable.

EXAMPLE ,

A hurricane causes widespread damage to property and loss of life in 

several counties of a coastal state. Over 100,000 homes are damaged or 

destroyed by high winds and flooding. The group of people affected by 

the disaster is large enough that providing aid to this group benefits the 

public as a whole. Therefore, a charitable organization can be formed 

to assist persons in this group since the eligible recipients comprise a 

charitable class.
11

EXAMPLE ,

A hurricane causes widespread damage to property and loss of life in 

several counties of a coastal state. In one of the affected counties, an 

existing charitable organization has an ongoing program that provides 

emergency assistance to residents of the county. A small number of 

residents of this county suffered significant injury or property damage 

as a result of the storm. The organization provided assistance to some 

of these individuals. The organization’s assistance was provided to a 

charitable class because the group of potential recipients is indefinite 

in that it is open-ended to include other victims of future disasters in 

the county.

NEEDY OR DISTRESSED TEST,

Generally, a disaster relief or emergency hardship organization must make a specific 

assessment that a recipient of aid is financially or otherwise in need. Individuals do not 

have to be totally destitute to be financially needy; they may merely lack the resources to 

obtain basic necessities. Under established rules, charitable funds cannot be distributed to 

individuals merely because they are victims of a disaster. Therefore, an organization’s 

decision about how its funds will be distributed must be based on an objective evaluation 

of the victims’ needs at the time the grant is made. The scope of the assessment required 

to support the need for assistance may vary depending upon the circumstances.

A charity may provide crisis counseling, rescue services, or emergency aid such as blankets 

or hot meals in the immediate aftermath of a disaster without a showing of financial need. 

Providing such services to the distressed in the immediate aftermath of a disaster serves a 

charitable purpose regardless of the financial condition of the recipients. However, as time 

goes on and people are able to call upon their individual resources, it may become increasingly 

appropriate for charities to conduct individual financial needs assessments. For example, if a 

charity intends to provide three to six months of financial assistance to families to pay for 

basic housing because of a disaster or emergency hardship, it would be required to make 

an assessment of financial need before disbursing aid. While those who may not have the 

resources to meet basic living needs may be entitled to such assistance, those who do not 

need continued assistance should not use charitable resources.

NO AUTOMATIC RIGHT TO CHARITY AID ,

An individual who is eligible for assistance because the individual is a victim of a disaster 

or emergency hardship has no automatic right to a charity’s funds. For example, a charitable 
12

organization that provides disaster or emergency hardship relief does not have to make an 

individual whole, such as by rebuilding the individual’s uninsured home destroyed by a flood, 

or replacing an individual’s income after the person becomes unemployed as the result of a 

civil disturbance. This issue is especially relevant when the volume of contributions received 

in response to appeals exceeds the immediate needs. A charitable organization is responsible 

for taking into account the charitable purposes for which it was formed, the public benefit of 

its activities, and the specific needs and resources of each victim when using its discretion 

to distribute its funds.

SHORT-TERM AND LONG-TERM ASSISTANCE ,

Often charitable organizations (or programs of existing charities) are established as a result 

of a particular disaster where both short-term and long-term assistance might be required. 

The following types of assistance, if based on individual need, would be consistent with 

charitable purposes:

n assistance to allow a surviving spouse with young children to remain at home with the 

children to maintain the psychological well-being of the family,

n assistance with elementary and secondary school tuition and higher education costs to 

permit a child to attend school,

n assistance with rent, mortgage payments or car loans to prevent loss of a primary home or 

transportation that would cause additional trauma to families already suffering, and,

n travel costs for family members to attend funerals and to provide comfort to survivors.

EXAMPLE ,

A group of individuals is killed in a fire in a large office complex. A 

charitable organization was previously formed to assist needy individuals 

in the surrounding region. The charity determines that some victims’ 

spouses and dependents lack adequate resources to meet immediate 

basic needs; others have resources to meet these needs, but will likely 

have a continuing need for counseling, medical, housing, childcare and 

education expenses. In this circumstance, the organization can grant 

funds to assist in meeting current and continuing needs. The organization can also set aside funds for possible future needs. However, when 

payments are made out of the set-aside funds, they must be based on 

needs of victims’ families that exist at the time the payments are made.
13

DOCUMENTATION ,

An organization must maintain adequate records to show that the organization’s payments 

further the organization’s charitable purposes and that the victims served are needy or 

distressed. Charities must also maintain appropriate records to show that they have made 

distributions to individuals after making appropriate needs assessments based on the 

recipients’ financial resources and their physical, mental, and emotional well-being. 

Generally, documentation should include:

n a complete description of the assistance provided,

n costs associated with providing the assistance,

n the purpose for which the aid was given,

n the charity’s objective criteria for disbursing assistance under each program,

n how the recipients were selected,

n the name, address, and amount distributed to each recipient,

n any relationship between a recipient and officers, directors, or key employees of, or 

substantial contributors to, the charitable organization, and,

n the composition of the selection committee approving the assistance.

DOCUMENTATION OF SHORT-TERM EMERGENCY AID ,

A charitable organization that is distributing short-term emergency assistance would only be 

expected to maintain records showing the type of assistance provided, criteria for disbursing 

assistance, date, place, estimated number of victims assisted (individual names and addresses are not required), charitable purpose intended to be accomplished, and the cost of the aid. 

Examples of such short-term emergency aid would include the distribution of blankets, hot 

meals, electric fans, or coats, hats and gloves. An organization that is distributing longer-term 

aid should keep the more-detailed type of records described above.
14

REPORTING ,

Most public charities and all private foundations are required to file an annual return. Public 

charities file Form 990, Return of Organization Exempt from Income Tax; Form 990-EZ, Short 

Form Return of Organization Exempt from Income Tax; or Form 990-N, Electronic Notice 

(e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-PF.

Private foundations file Form 990-PF, Return of Private Foundation or Section 4947(a)(1) 

Trust Treated as a Private Foundation.

If a public charity carries on disaster relief activities as one of its three largest programs, it 

must describe the services provided in the Statement of Program Service Accomplishments

on Form 990 or Form 990-EZ. See the form instructions for additional information about 

reporting obligations of public charities with respect to grants or other types of disbursements 

to individuals in connection with disaster relief programs. A public charity also may be required 

to complete Schedule F if it carries out foreign operations, or Schedule I for grants or other 

assistance to individuals.

Similarly, if a private foundation carries on disaster relief activities as one of its four largest 

programs, it must describe the services provided in its summary of direct charitable activities 

on Form 990-PF. See the Form 990-PF instructions for further information about reporting 

disaster relief activities of private foundations such as grants or other types of disbursements 

to individuals.

For additional information about the reporting requirements of public charities and private 

foundations, see the Life Cycle of a Public Charity and the Life Cycle of a Private Foundation 

at www.irs.gov/charities, as well as Publication 4221-PC, Compliance Guide for 501(c)(3) Public 

Charities, and Publication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations.

INCOME TAX TREATMENT OF QUALIFIED DISASTER PAYMENTS ,

Internal Revenue Code section 139 provides that qualified disaster relief payments from any 

source, including employers, reimbursing or paying individuals’ specified expenses in connection 

with qualified disasters are not taxable as income and are not subject to employment taxes 

or withholding.
15

A qualified disaster is defined in section 139 as a disaster that:

n results from terrorist or military actions,

n results from an accident involving a common carrier,

n is a Presidentially declared disaster, or,

n is an event that the Secretary of the Treasury determines is catastrophic.

Qualified disaster relief payments within the meaning of section 139 include payments 

received (regardless of the source) for the following expenses:

n reasonable and necessary personal, family, living, or funeral expenses incurred as a result 

of a qualified disaster,

n reasonable and necessary expenses incurred for the repair or rehabilitation of a personal 

residence due to a qualified disaster (a personal residence can be a rented residence or one 

you own), and,

n reasonable and necessary expenses incurred for the repair or replacement of the contents of 

a personal residence due to a qualified declared disaster.

Payments by a federal, state, or local government, or their agencies or instrumentalities, to 

persons affected by a qualified disaster in order to promote general welfare are also considered 

to be qualified disaster relief payments. For purposes of such payments by federal, state, or 

local governments, a qualified disaster includes the events listed above, as well as a disaster 

determined by a federal, state or local authority to warrant governmental assistance.

Qualified disaster relief payments do not include:

n payments for expenses otherwise paid for by insurance or other reimbursements, or,

n income replacement payments, such as payments of lost wages, lost business income, or 

unemployment compensation

E M P L O Y E R - S P O N S O R E D 

ASSISTANCE PROGRAMS ,

Frequently, employers fund relief programs through charitable organizations aimed at helping 

their employees cope with the consequences of a disaster or personal hardship. As noted above, 

all charitable organizations, including those that provide disaster relief, must demonstrate 

that they serve a public rather than a private interest and serve a charitable class. In the past, 

employer-sponsored organizations were considered to enhance employee recruitment and retention, resulting in private benefit to sponsoring employers. In addition, there were concerns that 
16

employers could exercise undue influence over the selection of recipients. For these reasons, 

special rules apply to employer-sponsored charities.

Employer-sponsored charities sometimes establish emergency hardship funds to help 

employees who have been the victims of crime or a personal loss such as a fire or a sudden 

death in the family.

Not all employer-sponsored charitable organizations are permitted to provide assistance 

to employees and their families in any type of emergency hardship situations. The types 

of benefits a charitable organization can provide through an employer-sponsored assistance 

program depend on whether the employer-sponsored organization is a public charity, a donor 

advised fund or a private foundation. When an employer-sponsored organization provides 

assistance to employees, certain limitations apply that help to ensure that such aid does not 

result in impermissible private benefit to the employer.

EMPLOYER-SPONSORED PUBLIC CHARITIES ,

Because public charities typically receive broad financial support from the general public, 

their operations are generally more transparent and are subject to greater public scrutiny. 

Accordingly, public charities may provide a broader range of assistance to employees than 

can be provided by donor advised funds or private foundations. An employer can establish an 

employer-sponsored public charity to provide assistance programs to respond to any type of 

disaster or employee emergency hardship situations, as long as the related employer does not 

exercise excessive control over the organization. Generally, employees contribute to the public 

charity and rank and file employees constitute a significant portion of the board of directors.

To ensure the program is not impermissibly serving the related employer, the following 

requirements must be met:

n the class of beneficiaries must be large or indefinite (a “charitable class”),

n the recipients must be selected based on an objective determination of need, and,

n the recipients must be selected by an independent selection committee or adequate substitute 

procedures must be in place to ensure that any benefit to the employer is incidental and tenuous. The charity’s selection committee is independent if a majority of the members of the 

committee consists of persons who are not in a position to exercise substantial influence over 

the affairs of the employer.

If these requirements are met, the public charity’s payments to the employer-sponsor’s 

employees and their family members in response to a disaster or emergency hardship are 

presumed: (1) to be made for charitable purposes, and (2) not to result in taxable compensation 

to the employees.
17

EMPLOYER-SPONSORED DONOR ADVISED FUNDS ,

Certain community foundations and other public charities maintain separate funds or accounts 

to receive contributions from individual donors. These individual donors then receive advisory 

privileges over investment or distribution of the donated funds.

In general, these organizations, known as donor advised funds, can make grants to 501(c)(3) 

public charities and, under certain conditions, to other organizations for charitable purposes, 

but cannot make grants to individual persons. However, there is an exception for certain 

employer-related funds or accounts established to benefit employees and their family members 

who are victims of a qualified disaster.

A donor advised fund or account can make grants to employees and their family members in 

the following circumstances:

n the fund serves the single identified purpose of providing relief from one or more qualified 

disasters as defined on page 14 in the discussion of section 139 of the Internal Revenue Code,

n the fund serves a charitable class,

n recipients of grants are selected based upon an objective determination of need,

n the selection of recipients of grants is made using either an independent selection committee 

or adequate substitute procedures to ensure that any benefit to the employer is incidental 

and tenuous (the selection committee is considered independent if a majority of its members 

consists of persons who are not in a position to exercise substantial influence over the 

employer’s affairs),

n no payment is made from the fund to or for the benefit of any director, officer, or trustee of 

the sponsoring community foundation or public charity, or members of the fund’s selection 

committee, and,

n the fund maintains adequate records to demonstrate the recipients’ need for the disaster 

assistance provided.

For a description of the types of records a fund must retain, see the previous section, 

Documentation, on page 13.

EMPLOYER-SPONSORED PRIVATE FOUNDATIONS ,

Like public charities, private foundations can make need-based distributions to victims of 

disasters or to the poor or distressed. However, several issues arise when an employer-sponsored 

private foundation provides aid that favors the employees of the sponsoring employer. The IRS 

has previously ruled that, because the availability of the disaster relief programs aided employers in recruiting and retaining a stable workforce, such programs conferred a significant private 

benefit on the sponsoring companies. However, after the September 11 attacks, Congress took 

the position that employer-sponsored private foundations should be able to provide assistance to 

employees in certain situations.
18

Accordingly, employer-sponsored private foundations may provide assistance to employees or 

family members affected by a qualified disaster, as defined in section 139 of the Code, as long 

as certain safeguards are in place to ensure that such assistance is serving charitable purposes, 

rather than the business purposes of the employer. Employer-sponsored private foundations can 

only make payments to employees or their family members affected by qualified disasters, not 

in non-qualified disasters or in emergency hardship situations.

The IRS will presume that payments in response to a qualified disaster, as defined above, made 

by a private foundation to employees (or family members of employees) of an employer that is a 

disqualified person (such as a company that is a substantial contributor) are consistent with the 

foundation’s charitable purposes if:

n the class of beneficiaries is large or indefinite (a “charitable class”),

n the recipients are selected based on an objective determination of need or, and,

n the selection is made using either an independent selection committee or adequate 

substitute procedures to ensure that any benefit to the employer is incidental and tenuous. 

The foundation’s selection committee is independent if a majority of the members of the 

committee consists of persons who are not in a position to exercise substantial influence 

over the affairs of the employer.

If the requirements of this presumption are met, the private foundation’s payments in response 

to a qualified disaster are treated as made for charitable purposes; do not result in prohibited 

self-dealing merely because the recipient is an employee (or family member of an employee) of 

the employer-sponsor; and do not result in taxable compensation to the employees.

The presumption described above does not apply to payments that would otherwise constitute 

self-dealing and subject the organization to excise taxes. For example, the presumption does 

not apply to payments made to (or for the benefit of) individuals who are directors, officers, or 

trustees of the private foundation or members of the private foundation’s selection committee.

While a private foundation may fail to meet all of the requirements of the presumption, other 

procedures and standards may be considered to constitute adequate substitutes to ensure that 

any benefit to the employer is incidental and tenuous, when all the facts and circumstances 

are taken into account. Conversely, even though a private foundation meets the presumption, 

the IRS may still review the facts and circumstances to ensure that any benefit to the employer 

is tenuous and incidental. For example, a program may not be used to induce employees to 

follow a course of action sought by the employer or designed to relieve the employer of a 

legal obligation for employee benefits.
19

EXAMPLE ,

A for-profit company is located in an area of the country designated a 

Presidentially-declared disaster because of hurricane devastation. A 

private foundation funded by the company establishes a new program 

to provide assistance to the company’s employees and their immediate 

family members who are victims of the current disaster and any future 

qualified disasters. The private foundation’s committee that selects 

recipients for assistance consists of a majority of members who are 

not in a position to exercise substantial influence over the affairs of the 

company. The foundation provides assistance to the employees and 

their families based on an objective determination of need.

The foundation’s program does not relieve the company of any legal 

obligation, such as an obligation under a collective bargaining agreement 

or written plan that provides insurance benefits. The company does not 

use the program to recruit employees to continue their employment, or 

to otherwise follow a course of action sought by the company.

Because the foundation serves a charitable class, provides assistance 

based on an objective determination of need, and has an independent 

selection committee, the IRS will presume that it is carrying out a 

charitable program. Distributions are neither self-dealing transactions 

between the foundation and the employer nor taxable compensation 

to its employees under the program.

See the Life Cycle of a Private Foundation at www.irs.gov/charities for information about 

foundation excise taxes, self-dealing, and disqualified persons.

For a description of the types of records a private foundation must retain, see the previous 

section, Documentation, on page 13.
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S P E C I A L T A X R U L E S F O R R E C I P I E N T S 

OF DISASTER RELIEF ASSISTANCE ,

This part of the publication discusses special tax rules that apply to individuals who receive 

assistance from public charities, private foundations, employer-related charitable organizations, 

government entities and other sources in disaster situations.

Gross income, for federal income tax purposes, generally includes all income from whatever 

source derived, unless a specific exception applies. Whether a payment to a disaster victim 

constitutes gross income for income tax purposes or compensation subject to employment tax 

depends, in part, on the source of the payment.

CHARITABLE ORGANIZATIONS ,

Payments that individuals receive under a charitable organization’s program as a result of a 

disaster or emergency hardship are considered to be gifts and are excluded from gross income of 

recipients under section 102 of the Code. Payments from an employer-sponsored public charity 

or private foundation are also exempt from gross income as gifts so long as the requirements 

described in Employer-Sponsored Assistance Programs, page 15, are met.

An examination of the facts and circumstances surrounding a charity’s payment to a for-profit 

business will govern whether the business can exclude the amount paid from gross income as 

a gift under section 102 of the Code. The IRS will evaluate whether the charity intended the 

payment to be a gift, and was motivated by charitable impulses. If the payment was made out 

of a moral or legal obligation, an anticipated economic benefit or in return for services, the 

payment will not be excluded from income as a gift.

FEDERAL AND STATE GOVERNMENT,

Generally, payments that individual disaster victims receive from governmental units under 

social programs for the promotion of the general welfare (i.e. based on need) are not included 

in the gross income of the recipients of the payments. In addition, certain payments that individuals receive from a state, federal or local government (or agency thereof), in connection 

with a qualified disaster, as described on page 14, are excluded from the gross income of the 

recipient under section 139 of the Code. See Direct Assistance from Employers and Other 

Sources, page 21, for additional information about the types of payments excluded from 

income and employment taxes under section 139.

EXAM
EXAMPLE ,

An area within a state was affected by a hurricane that was a 

Presidentially-declared disaster. The state enacted emergency 

legislation to provide grants to pay or reimburse medical, temporary 

housing, and transportation expenses incurred by individuals as a 

result of the flood that are not compensated by insurance or otherwise. 

Payments received under the state’s grant program are excluded from 

income under the general welfare exclusion as well as under section 

139 of the Code.

DIRECT ASSISTANCE FROM EMPLOYERS AND OTHER SOURCES ,

In some instances a corporation or other non-exempt entity may choose to provide direct assistance to disaster victims rather than funneling its assistance through a charity or governmental 

entity. In addition, sometimes an employer may provide assistance through a non-exempt fund 

established to receive contributions from the employer as well as employees. In certain circumstances, payments from such sources may receive favorable tax treatment as well. As noted on 

page 14, section 139 of the Code provides for special tax treatment of qualified disaster relief 

payments made to victims of a qualified disaster, regardless of the source. Qualified disaster 

relief payments are not included in the income of recipients to the extent that any expenses covered by these payments are not otherwise compensated by insurance or other reimbursements. 

Qualifying payments are not subject to income tax, self-employment tax, or employment taxes 

(Social Security, Medicare, and federal unemployment taxes) even if the payments are made 

directly from an employer.

EXAMPLE ,

A for-profit corporation makes grants to its employees who are 

affected by a flood that was a Presidentially-declared qualified 

disaster. The grants will pay or reimburse employees for medical, 

temporary housing, and transportation expenses they incur as a 

result of the flood that are not compensated by insurance or 

otherwise. The corporation will not require individuals to provide 

proof of actual expenses to receive a grant payment. The 

corporation’s program, however, contains requirements (which

 are described in the program documents) to ensure that the grant 

amounts are reasonably expected to be commensurate with the 

amount of unreimbursed reasonable and necessary medical, 

21
22

temporary housing, and transportation expenses the corporation’s 

employees incur as a result of the flood. The grants are not intended 

to indemnify all flood-related losses or to reimburse the cost of nonessential, luxury, or decorative items and services. The grants are 

available to all employees regardless of length or type of service 

with the corporation.

The grants made by the employer are qualified disaster relief payments 

expected to be commensurate with the unreimbursed reasonable and 

necessary personal, living or family expenses of the employees not 

compensated by insurance or otherwise. The grants are excluded from 

the employees’ gross income under section 139.

G I F T S A N D C H A R I T A B L E 

CONTRIBUTION RULES ,

This part of the publication discusses the tax rules that apply to individuals who want to claim 

a tax deduction for their contributions to a qualified charitable organization. It also discusses 

the potential liability of donors for gift tax.

CHARITABLE CONTRIBUTIONS ,

Contributors to qualified domestic charitable organizations may be eligible to claim federal 

income tax deductions for their contributions if they file itemized tax returns. Qualified 

organizations include charitable organizations that the IRS has determined are exempt 

from federal income tax. Churches, synagogues, temples and mosques are also qualified 

charitable organizations. 

Domestic charitable organizations are those created under the laws of the United States or its 

possessions. For charitable contribution purposes, United States possessions include Puerto 

Rico, the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of Northern 

Mariana Islands.

See Publication 526, Charitable Contributions, for a complete description of qualified 

organizations.
23

Before making a contribution to an organization for disaster relief, a contributor may want to 

verify whether the contribution would be tax-deductible. A contributor may use the following 

resources to determine if the organization is qualified to accept tax-deductible contributions:

n Go to EO Select Check on the Charities and Nonprofits home page on the IRS website, 

www.irs.gov, to access an online database of qualified charitable organizations, or,

n Call IRS Exempt Organizations Customer Service at (877) 829-5500.

Potential contributors, like other interested members of the public, may obtain a copy of an 

organization’s exemption application or its recent annual information returns (Form 990, 

990-EZ, 990-PF or 990-N).

Contributors can contact the organization directly or submit Form 4506-A, Request for Public 

Inspection or Copy of Exempt Organization IRS Form, to the IRS to receive copies of the 

completed forms. Some organizations also post the forms on their website. An organization’s 

Form 990-N may be accessed on the IRS website using EO Select Check.

A contributor cannot claim a tax deduction for any cash, check, or other monetary contribution 

to a qualified charitable organization made on or after January 1, 2007, unless the donor 

maintains a record of the contribution in the form of either a bank record (such as a canceled 

check) or a written communication from the charity (such as a receipt or a letter) showing the 

name of the charity, the date of the contribution, and the amount of the contribution. For more 

information about contributions, see Publication 526, Charitable Contributions.

In addition, a donor cannot claim a tax deduction for any single contribution of $250 or more 

unless the donor obtains a contemporaneous acknowledgment of the contribution from the recipient organization. For detailed information on what a charity is required to include in written 

acknowledgment statements given to donors, see Publication 1771, Charitable Contributions—

Substantiation and Disclosure Requirements.

FOREIGN CONTRIBUTIONS ,

Contributions to qualified domestic charitable organizations that provide assistance to individuals 

in foreign countries qualify as tax-deductible contributions for federal income tax purposes, 

provided the U.S. organization has full control and discretion over the uses of such funds. 

If the contributor is a corporation, its contributions for use in a foreign country are not deductible 

unless the domestic charity is itself organized as a corporation for federal tax purposes.

Contributions to foreign organizations are generally not tax-deductible, unless permitted by a 

tax treaty. The United States currently has tax treaties with Canada, Mexico, and Israel. See 

Publication 526, Charitable Contributions, for limitations that apply pursuant to these treaties.

.
24

GIFTS ,

Individuals can also help victims of disaster or hardship by making gifts directly to victims. 

This type of assistance does not qualify as a tax-deductible contribution since a qualified 

charitable organization is not the recipient. However, individual recipients of gifts are generally 

not subject to federal income tax on the value of the gift. If you make a gift directly to an 

individual, you are not subject to federal gift tax unless the total gifts made in a year exceed 

the annual exclusion amount.

Sometimes providing financial assistance apart from a qualified charity is desirable.

EXAMPLE ,

Jim, a college student and a counselor at a summer camp, accidentally 

rolls his old truck into a lake. The other counselors collect several 

hundred dollars and give the monies directly to Jim to help with the 

down payment for another truck. Since the counselors are making gifts 

to a particular individual, the use of a qualified charitable organization 

would not be appropriate. The counselors cannot claim tax deductions 

for their gifts to Jim. However, Jim is not subject to federal income tax 

on the gift amount. The other counselors would not be subject to federal 

gift tax if the total gifts made by each counselor to Jim during the year 

did not exceed the annual exclusion amount.

For more information about the taxability of gifts, see Publication 559, Survivors, Executors, 

and Administrators.
A D D I T I O N A L H E L P O N 

DISASTER-RELATED TOPICS ,

The IRS has a number of forms and publications on disaster relief and tax exemption 

that may be helpful to your organization.

FORMS AND PUBLICATIONS ,

To order free IRS publications and forms, call the IRS at (800) 829-3676. 

Download IRS publications and forms at www.irs.gov.

Form 1023, Application for Recognition of Exemption under Section 501(c)(3) 

of the Internal Revenue Code,

Form 1023-EZ, Streamlined Application for Recognition of Exemption under 

Section 501(c)(3) of the Internal Revenue Code,

Publication 526, Charitable Contributions,

Publication 547, Casualties, Disasters, and Thefts,

Publication 557, Tax-Exempt Status for Your Organization,

Publication 559, Survivors, Executors, and Administrators,

Publication 561, Determining the Value of Donated Property,

Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property),

Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook,

Publication 1771, Charitable Contributions—Substantiation and Disclosure Requirements,

Publication 2194, Disaster Resource Guide for Individuals and Businesses,

TELEPHONE ASSISTANCE ,

The following telephone numbers will connect you to IRS customer service.

(877) 829-5500, IRS Exempt Organizations Customer Account Services,

for tax information specific to exempt organizations,

(215) 516-2000, IRS International Customer Service,

for tax information specific to foreign tax issues,

(800) 829-1040, IRS Customer Service,

for general tax information,

Publication 3833 (Rev. 12-2014) Catalog Number 32168V Department of the Treasury Internal Revenue Service www.irs.gov