Payroll Brass Tax: Understanding PTO Donation Programs—A Guide for Employers

Ogletree Deakins’ new podcast series, Payroll Brass Tax, offers insights into frequently asked questions about employment and payroll tax. In the inaugural episode, Mike Mahoney (shareholder, Morristown/New York) and Stephen Kenney (associate, Dallas) discuss paid time off (PTO) donation programs, which allow employees to support each other during challenging times, such as natural disasters or prolonged illnesses. Stephen and Mike explain the three types of PTO donation programs—general, medical emergency, and natural disaster—and highlight the tax implications and administrative considerations associated with each type. The speakers emphasize the importance of carefully structuring PTO donation programs to avoid potential tax issues, particularly those related to the assignment of income doctrine, which provides that income is taxed to the individual who earns it, even if the right to that income is transferred to someone else.