Congress recently passed a permanent extension of their enhanced tax deductions for food donations found in Section 170(e)(3) of the U.S. Tax Code. Per the Harvard Food Law and Policy Clinic, the extension and modification of the charitable deduction for donated food inventory contains four significant changes that benefit companies who give back:
- Permanently extends the enhanced tax deduction for food donations
- Increases the deduction’s cap to 15% of the donor’s net income
- Provides certain taxpayers a new optional formula for calculating the enhanced deduction
- Provides a formula for determining the fair market value (FMV) of food inventory
Additional tax benefits are also available when donating non-conforming, but otherwise safe, food. Often this can be an even greater benefit than the tax relief companies earn from simply disposing of the goods.
It’s well worth the extra effort to ensure unsellable food goes to those in need.
If regulatory constraints and liability issues are keeping you from donating unusable product, it is worth noting that the Bill Emerson Good Samaritan Act of 1996 protects companies who act in 'good faith' from liability issues. The obvious exception is in the event of gross negligence. Consult with your legal counsel to be sure you're in compliance.
Source: Harvard Food Law and Policy Clinic via Spoiler Alert
What financial documentation should I keep for the IRS?
- Fair Market Value (FMV): the price at which donated food items are being sold elsewhere in the market
- Cost: that is, the cost of production, distribution, and/or acquisition of the food (25% of FMV for certain farms and small businesses)
Where can I find out more information?
- The actual legislation regarding enhanced tax deductions
- Tax deduction for food donation: a legal guide - updated April 2016
- The Food Waste Reduction Alliance, which provides a comprehensive list of resources
The need and opportunity to reduce food waste have never been greater. Reducing food waste throughout the supply chain delivers significant environmental, social, and economic benefits. Why wait to start giving back, when you can reap financial benefits while you're at it?
About Food Waste Reduction Alliance (FWRA)
Formed in 2011, the FWRA operates under the auspices of the food sector’s leading trade associations, the Grocery Manufacturers Association (GMA), the Food Marketing Institute (FMI), and the National Restaurant Association (NRA). This landmark, cross-industry initiative includes more than 30 manufacturing, retailing and foodservice companies, along with expert partners from the anti-hunger community and waste management sector (scroll down for a complete list of members). The Alliance is co-chaired by ConAgra Foods, one of the world’s largest food processors, Wegman’s Supermarkets, a leading U.S. grocery store chain, and Wendy’s QSCC the exclusive supply chain manager for all Wendy’s restaurants in North America.