On March 13, 2020, the President declared the COVID-19 pandemic to be an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”). The decision to declare an emergency is addressed in a letter from the President to Administration officials in which he explained that his decision to issue an emergency declaration was “based on the fact that our entire country is now facing a significant public health emergency.”
Employers may be wondering whether this declaration provides an opportunity to offer “qualified disaster relief payments” under Internal Revenue Code § 139 to employees as a means of mitigating the pandemic’s effects. It is not entirely clear. Because the President declared an emergency—not a major disaster—it is not clear, until we get further guidance from the IRS that employers that they may rely on Code § 139 as a means of providing tax-free benefits to their employees. Section 139 refers specifically to a declared disaster as do the regulations under section 165(i), which are cross-referenced in the section 139 rules. Less formal IRS guidance in the form of revenue procedures have conflated the two types of declarations in the past, however, and the IRS has indicated that for purposes of section 165(i), “a disaster includes an event declared a major disaster or an emergency.” However, in the interim, employers may still adopt other policies, such as leave-sharing, that will ease the pandemic’s toll on affected employees.