United States Tax Benefits
The following information is presented for general information only. Consult with your Attorney
or Tax Consultant to determine its application to your specific organization and situation.
Current Tax Law
U.S. Congress enacted
Section 170 of the Internal Revenue Code in 1976 to encourage donations by allowing
C corporations to earn an enhanced tax deduction for donating selected surplus property, including food.
The Code provides that wholesome food that is properly saved, donated to an approved agency and properly receipted is eligible for an enhanced tax deduction.
This enhanced deduction is equal to ½ of the donated food’s appreciated value, with the limitation that the total deduction cannot exceed twice the donated food’s basis
cost. This incremental tax deduction is calculated from the donated food’s fair market value and basis food and labor cost. The IRS may challenge the value of donated food.
Fair market value (FMV) continues to be evaluated by the IRS on a company by company basis. Congress’ intention
to encourage this type of donation would be enhanced by codifying an important Tax Court ruling regarding FMV determinations.
See an explanation of how this enhanced tax deduction applies to
Food Donation Tax Law for Non C Corporations
While this tax law is permanent for C corporations, since 2005 the law for non-C corporations is required to be extended every two years.
The Katrina Emergency Tax Relief Act
(KETRA) (H.R. 3768) passed by Congress on September 22, 2005 extended this
enhanced tax deduction of Section 170 to all business entities. This extension applies to all qualifying
donations made between August 28 and December 31, 2005.
The Pension Protection Act of 2006
(PPA) (H.R. 4) signed by President Bush on August 17, 2006
extended the Enhanced Charitable Deduction for Contributions of Food Inventory
through December 31, 2007.
The Emergency Economic Stabilization Act of 2008
(H.R. 1424) signed by President Bush on October 3, 2008
the Enhanced Charitable Deduction for Contributions of Food Inventory through December 31, 2009.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R.4853, Public Law 111-312)
signed by President Obama on December 17, 2010 extended the Enhanced Charitable Deduction for Contributions of Food Inventory through December 31, 2011.
The Taxpayer Relief Act of 2012
(Public Law 112-240)
signed by President Obama on January 2, 2013, provided a two-year extension of the Enhanced Charitable Deduction for Contributions of Food Inventory to December 31, 2013.
Tax Extender legislation (H.R. 5771), including the enhanced tax deduction for 2014 food donations by non-C corporations, was signed into law on December 19, 2014.
Tax incentives for C corporations remain permanent.
Technical Tax Correction for S Corporations
Prior to December of 2007, S corporations with limited shareholder basis faced a dilemma regarding their ability to take the enhanced
tax deduction for donating food inventory. FDC submitted a technical correction to the House Committee on Ways and Means in 2007 which was
integrated into The Tax Technical Corrections Act of 2007 (HR 4839 and Public Law 110-172).
This made a technical correction to the provision relating to contributions
of appreciated property by an S corporation.
The technical correction provides that the present-law basis limitation on the deduction of S corporation
items does not apply to a contribution of appreciated property to the extent the shareholder’s pro rata share of the contribution exceeds
the shareholder’s pro rata share of the adjusted basis of the property. This means that S corporation shareholders can take the enhanced deduction
regardless of their basis in the corporation.
Wholesome Surplus Food Feeds People
Food Donation Connection has been actively involved with tax law issues since 1992 and is currently participating in efforts to resolve the corporate entity and valuations issues.
Food Donation Connection administers the Harvest Program to
coordinate the distribution of excess food from restaurants and
other food service organizations to qualified local non-profit
organizations that help people in need.
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