Academic journal article Journal of Accountancy

Employer Benevolent Funds: Helping Needy Workers after a Disaster

Academic journal article Journal of Accountancy

Employer Benevolent Funds: Helping Needy Workers after a Disaster

Article excerpt

Recent events and legislation have sparked tremendous interest in employer benevolent funds, which help employees who are victims of natural disasters, national emergencies, financial hardships or family crises. Because the funds must adhere to strict rules to maintain tax-exempt status, their major concern is determining whether workers requesting aid qualify. CPAs should become familiar with such rules.

BACKGROUND

The Victims of Terrorism Tax Relief Act of 2001, section 111, enacted IRC section 139, which provides for tax-free reimbursements of reasonable and necessary personal, family, living or funeral expenses resulting from a qualifying disaster and for expenses to repair or rehabilitate a personal residence or its contents, to the extent the need is attributable to a qualifying disaster, or just to promote general welfare.

Under IRC section 139(c), a "qualifying disaster" (1) is presidentially declared; (2) results from terrorism, military action or an accident with a common carrier or from any other event the IRS determines to be catastrophic; or (3) is determined by an applicable federal, state or local government.

QUALIFYING FOR PAYMENTS

For eligible victims of natural disasters or national emergencies, a benevolent fund can replace basic needs such as food, clothing, housing (including repairs), transportation and medical assistance (including psychological help). The fund is not intended to make a person whole (which would be a private benefit jeopardizing the fund's tax-exempt status), just to meet basic needs.

A fund's board or disbursing trustees use several criteria in determining whether an applicant qualifies for financial relief. …

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