Expanding federal tax benefits for food donations to all businesses and simplifying donation reporting for tax deductions
Tax incentives, whether in the form of credits or deductions, induce farms, retailers, restaurants, and foodservice providers to undertake the behavioral and operational changes needed to donate additional food instead of sending it to disposal. It is expected that the tax benefits will roughly equal the incremental costs of donation, leading to a net breakeven financial impact for businesses.
In total, up to $750 million of additional annual federal tax deductions should be funded to achieve 380,000 tons of additional donations: $620 million in incentives to farms would yield an additional 525 million donated meals, while $130 million provided to restaurants and retailers would generate 115 million meals annually. There is a lack of data regarding the portion of food donors that receive tax incentives. Anecdotal evidence from ReFED interviews suggests that a large portion of businesses may not go through the effort of claiming small tax benefits after donating, which could significantly reduce the net cost of this solution.
While enhanced deductions were passed in December 2015 as part of the Protecting Americans from Tax Hikes (PATH) Act, food donation tax incentives will require ongoing support from food recovery organizations, foundations, and businesses to make them a priority in the face of future tax reforms.
In December 2015, Congress signed into law a tax break package with provisions making permanent the charitable giving tax incentives for donating food. Supported by a coalition of nonprofit organizations including Feeding America, the Protecting Americans from Tax Hikes (PATH) Act made various new business entities eligible for food inventory enhanced deductions that had previously only been accessible to large C corporations. Under the previous standard food donation deduction, a business could only claim the cost basis of donated inventory. An enhanced deduction passed in this legislation allows businesses to claim both the cost basis and half of potential profits if the inventory could be sold at fair market value. This new legislation is expected to spur increased donations from farms and smaller retailers and restaurants.
Educating potential food donors on donation liability laws
Standardizing local and state health department regulations for safe handling and donation of food through federal policy
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