IRS, ADOR Expand Katrina Relief Provisions

Automatic Extensions of Time

In an Information Release dated September 12, the Alabama Department of Revenue announced that it was following the lead of the IRS in setting January 3, 2006 as the extended due date for filings by residents of all counties designated as Presidential Disaster Areas due to Hurricane Katrina. The Alabama counties affected are Baldwin, Clarke, Choctaw, Mobile, Sumter and Washington. Clarke, Choctaw and Sumter have been added to the Disaster Area list since ADOR's initial relief announcement on September 2.

Taxpayers in the six counties will have until January 3, 2006 to file returns and make tax payments for individual income tax, corporate income tax, income tax withholding, and business privilege tax. The special extension includes individual estimated tax payments due on 9/15, as well as extended corporate tax returns due on the same date. The Release makes it clear that eligible taxpayers will not be subject to penalties for late filing or late payment within the special extension period. However, ADOR points out that there is no provision in the Alabama Code allowing for the abatement of interest on late payments of taxes, so interest charges will still apply.

As was the case with the original announcement, there is no mention of sales taxes or gasoline taxes in the September 12 release. The text of the release says that

"Relief measures for other taxes administered by the ADOR will be handled on a case-by-case basis. Taxpayers who are unable to meet future filing requirements as the result of damage caused by Hurricane Katrina are urged to contact the ADOR by e-mail at www.revenue.alabama.gov or at the telephone numbers provided below."

The contact phone numbers provided in the Release are

  • Individual Income Tax, (334) 242-1099
  • Income Tax Withholding, (334) 242-1300
  • Corporate Income Tax, (334) 242-1200
  • Business Privilege Tax, (334) 353-7923
  • Sales, Use & Business Tax, (334) 242-1490

Leave Donation

On September 16, ADOR also announced that it would join with the IRS in allowing Alabama employees to donate to hurricane relief through employer-sponsored leave-donation programs. Under the programs, employees can donate unused leave and vacation time in exchange for cash payments by employers to qualified tax-exempt organizations who are providing relief to victims of Hurricane Katrina. The employee is not required to include the compensation for the donated leave in taxable income, and therefore does not claim a charitable deduction for the donation. However, the employer is entitled to claim a deduction for the cash payment to the relief organization.

Comment: This provision allows employees to "leverage up" their donations by making them with before-tax dollars, and leaves employers in essentially the same place they would have been had they compensated the employee for the leave time. For example, assume that an employee who is paid $100 per day has three vacation days left and wants to make a $200 donation to Katrina relief. Assuming a 33.3% withholding rate for all taxes, she would have to use her net pay from all three days ($300 - (300*33.3%) = $200) to make the donation in cash. Under the leave-donation arrangement, she could make the $200 donation by agreeing to work two of the leave days without pay, and still have the third day available to spend by the pool and get paid for it.

According to the announcement, employers can claim the deduction for cash payments made to qualified tax-exempt organizations before January 1,2007.

This page last updated 9/18/05

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