Tuesday, April 26, 2016
New Legal Guide on the Federal Enhanced Tax Deduction for Food Donations
The Food Law and Policy Clinic (FLPC), in partnership with the FoodRecovery Project at the University of Arkansas School of Law, is pleased to publish an updated version of Federal Enhanced Tax Deduction for Food Donation: A LegalGuide, to reflect the significant changes Congress made as part of the fiscal year 2016 omnibus appropriations legislation. This legislation increased tax incentives for food donations as a mechanism to prevent food waste.
This guide, originally published in November 2015, provides an important resource for food businesses and food recovery organizations to determine whether a food donor is eligible to receive the enhanced deduction.
An estimated 40 percent of food produced in the United States goes uneaten; at the same time, more than 14 percent of U.S. households are food insecure at some point during the year. Diverting a fraction of the wholesome food that currently goes to waste in this country could effectively end food insecurity for all Americans.
The extension and modification of the charitable deduction for contributions of food inventory included in the 2016 omnibus appropriations legislation contains four significant changes:
1) a permanent extension of the enhanced tax deduction for food donations;
2) an increase in the deduction’s cap to 15% of the donor’s net income;
3) a new optional formula for calculating the enhanced deduction that is available to certain taxpayers; and,
4) a formula for determining the fair market value (FMV) of food inventory.
Each of these are reflected in the updated legal guide and explained in detail in FLPC’s previous blog post.
Given the significant negative impacts of wasting food, more food businesses should consider donating their excess, wholesome food. This guide hopes to encourage more food donation by shedding light on how the federal enhanced tax deduction makes food donation a more financially feasible practice for certain businesses, and what businesses need to do to be eligible for this enhanced deduction.