Furlough pay as a charitable contribution

[rosicamp]

A city is asking its employees to be furloughed, however, my client is in a classification that prohibits their pay to be reduced directly by 10%, therefore he will be paid in full and voluntarily contributing 10% of his pay to the city to participate in the furlough program.  Can this contribution be deducted as a charitable deduction?

[TaxGuyBill]

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@rosicamp wrote:

voluntarily contributing 10% of his pay to the city to participate in the furlough program. 

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Voluntarily contributing money to the city would be a charitable donation, BUT you said it was "to participate" in the program.  So are they receiving a benefit from that contribution?  Is that required to participate?  If so, that probably reduces or eliminate the tax deduction.

What exactly is the benefit they are receiving (the "furlough program")?

[rosicamp]

The city will continue to pay him his full salary, and he will donate 10% back.  

It's assumed his W-2 will show his full salary and will be taxed accordingly.  Most of the city employees have agreed to some form of cutbacks through work hours or work pay.  Because his salary is tied to retirement benefits the city is prohibited from reducing his salary to provide the budget relief.

The city is the one benefiting.  

Since the letter he received does not indicate that the W-2 will indicate the reduction, my client is trying to balance out the taxes for income he will not receive by possibly deducting a charitable contribution.  

[sjrcpa · Accepted solution]

Does this letter say, due to your employment terms we will continue paying your full salary during this furlough and you will donate 10% back to us? 

If yes, that's a quid pro quo and no charitable contribution.

[rbynaker]

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@sjrcpa wrote:

Does this letter say, due to your employment terms we will continue paying your full salary during this furlough and you will donate 10% back to us? 

If yes, that's a quid pro quo and no charitable contribution.

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I'm having trouble wrapping my brain around this thing.  If Paul Harvey were still alive maybe we could get The Rest of the Story.

What if the employee doesn't "agree" to be furloughed?  The fact that this is running through payroll suggests to me that there are conditions on it which likely lead to a quid pro quo.  i.e. you pay us 10% of your salary and we won't lay you off.

Is he going to get an ack letter for the donations?

Rick

[itonewbie]

I too think there's more to this story...

First, the city can't cut his pay by 10%.  Now, they can't because his salary is tied to retirement benefits.  But isn't everyone's retirement benefits tied to the salary somehow?  And what if he ends up not making the voluntary contributions, whether he agreed or not.  What proof does he need to produce?  What recourse does the city have if he doesn't?  If the city is contractually prohibited from cutting his pay by 10% or putting him on furlong, I just don't see how they could legally oblige him to do anything.