IRS Designates Chile Earthquake a "Qualified Disaster"

On Tuesday, the IRS designated the Feb. 27 earthquake in Chile as a “qualified disaster” for purposes of IRC § 139 (Notice 2010-26). As a result, victims of the earthquake who receive qualified disaster relief payments will be able to exclude those payments from income. The notice also allows employer-sponsored private foundations to assist their employees in areas affected by the earthquake without jeopardizing their tax-exempt status.


Qualified disaster relief payments are defined by section 139 as amounts paid:

(1) To or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living or funeral expenses (not otherwise compensated for by insurance or otherwise) incurred as a result of a qualified disaster; or

(2) To reimburse or pay reasonable and necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation or replacement is attributable to a qualified disaster.

The IRS must declare that a disaster is a “qualified disaster” for payments to meet these criteria.


Under the notice, employer-sponsored private foundations will be allowed to make qualified disaster relief payments to employee victims of the earthquake without affecting their tax-exempt status under the private inurement rules of Treas. Reg. § 1.501(c)(3)-1(c)(2). The IRS will presume that qualified disaster relief payments made by a private foundation to its employees and their family members in areas affected by the earthquake are consistent with the foundation’s charitable purposes (IRS News Release IR-2010-28).



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