The response of the federal government to the COVID-19 pandemic has focused on fiscal incentives and tax relief. These initiatives include triggering the ability of employers to make payments to employees that are deductible to the employer but are not subject to either federal income tax, or federal social security tax, in the hands of the employee. This incentive allows employers to turn up to “one dollar into two” for employees by complying with the provisions of Section 139 of the Internal Revenue Code of 1986 , as amended (the “Code”) when making COVID-19 relief payments. Code § 139 is not subject to any top-heavy limitations or non-discrimination rules and provides significant flexibility to employers.

Specifically, the opportunity to treat employee payments as described in Code § 139 was triggered on March 13, 2020, when President Trump declared the ongoing COVID-19 pandemic a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”).

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