A recent notice issued by the IRS details how a leave-sharing plan must be designed. First, the plan must treat payments made by the employer to the leave recipient as "wages" for purposes of FICA (the Federal Insurance Contributions Act), FUTA (the Federal Unemployment Tax Act), and income tax withholding; as "compensation" for purposes of RRTA (the Railroad Retirement Tax Act); and as "rail wages" for purposes of RURT (the Railroad Unemployment Repayment Tax), unless otherwise excluded by the Code. Second, a leave donor may not claim an expense, charitable contribution, or loss deduction on account of the deposit of the leave or its use by a leave recipient.

A major disaster leave-sharing plan is a written plan meeting a number of requirements, which are spelled out in the Notice. Among those requirements are the following:

• Under the plan, an employee is considered to be adversely affected by a major disaster if the disaster has caused severe hardship to the employee or a family member of the employee that requires the employee to be absent from work.
• The plan does not allow a leave donor to deposit leave for transfer to a specific leave recipient.
• The amount of leave that a leave donor may donate in any year generally may not exceed the maximum amount of leave that an employee normally accrues during the year.
• The plan adopts a reasonable limit, based on the severity of the disaster, on the period of time after the major disaster during which a leave donor may deposit the leave and a leave recipient must use the leave.
• A leave recipient may not convert leave received under the plan into cash. But a leave recipient may use leave received under the plan to eliminate a negative leave balance caused by a major disaster.
• Leave deposited on account of one major disaster may be used only for employees affected by that major disaster.