The Internal Revenue Service has issued guidance designating last month’s earthquake in Chile as a qualified disaster for federal tax purposes.

The guidance allows individuals who receive qualified disaster relief payments from any person to exclude those payments from income on their tax returns. In addition, the guidance allows employer-sponsored private foundations to assist employees in areas affected by the Chilean earthquake without affecting their tax-exempt status.

Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences, or repair or replace the contents to the extent that they were not covered by insurance. These payments would not be included in the individual recipient’s gross income.

Qualified disasters include presidentially declared disasters and any other event that the Treasury Secretary determines to be of a catastrophic nature. The IRS will presume that disaster relief that a private foundation provides to employees and their family members in areas affected by the earthquake in Chile are consistent with the foundation’s charitable purposes.

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