On March 9, 2010, the IRS issued guidance designating the earthquake that occurred in Chile in February, 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income tax. The guidance also allows employer-sponsored private foundations to assist employee victims in areas affected by the earthquake without affecting their tax-exempt status.
Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance.
The IRS will presume that disaster relief that a private foundation provides to employee-victims and their family members in areas affected by the earthquake in Chile is consistent with the foundation’s charitable purposes.
For additional information on disaster relief, please refer to the IRS Publication 3833 on Disaster Relief and other disaster relief resources for charities and contributors on the IRS website.