State Follows U.S. Lead in Katrina Tax Benefits

This is in response to “Giving Your Vacation Break to Katrina Victims” (Sept. 18) describing new federal tax benefits for employees who would like to donate the cash value of their vacation, sick time or personal leave to the victims of Hurricane Katrina.

I would like to inform you that state Controller Steve Westly and I have announced that the Franchise Tax Board will conform its policies to the temporary IRS rule discussed in your article.

In other words, the tax benefits recently enacted by the IRS also are available in California. Under the new federal and state rules, employers may make cash contributions to qualifying organizations on behalf of their employees who choose to forgo vacation, sick time or personal leave to assist the victims of Hurricane Katrina.

Employees will not have to claim the value of their donated vacation time as taxable income if the payments are made to qualifying organizations before Jan. 1, 2007. Businesses will be able to deduct the amount of their cash payments on their state tax filings.

Since these rules are in place through the end of 2006, I encourage employers to make a strong effort to offer this new tax benefit to their employees.

My office is available to assist taxpayers with questions about these issues. Please contact me at (213) 239-8506 or visit the Board of Equalization website at www.boe.ca.gov.

John Chiang

Chairman

State Board of Equalization

Sacramento