This blog post was written by Sophie DeBode, a student in the Food Law and Policy Clinic.
On March 31st, 2022 Representative Shontel Brown (OH), Representative Chellie Pingree (ME), Representative Fred Keller (PA), and Representative Troy Balderson (OH) introduced bipartisan legislation, the Further Incentivizing Nutritious Donations (FIND) Food Act of 2022 (the “FIND Food Act of 2022”), that will encourage the donation of wholesome, safe food across the country by expanding the federal tax incentive for food donation. The Harvard Law School Food Law & Policy Clinic (FLPC) applauds this new legislation. The Act implements several of the Food Law & Policy Clinic’s recommendations to expand incentives to better support and institutionalize surplus food donation.
Currently, the United States has a federal enhanced tax deduction for food donation, which provides an incentive for businesses to donate food by allowing them to deduct nearly twice the amount for food donations as can be deducted for other charitable donations. However, the structure of the current tax deduction has a few shortcomings—it is not well-suited for farmers, it discourages innovation because it does not cover donations to nonprofits that offer food to end recipients at a very low price, and it does not cover transportation costs associated with donation. The current policy discourages farmers from donating and nonprofits from innovating, leading to excess waste.
To improve the framework of the existing tax deduction to better incentivize food donation through tax credits and deductions, the FIND Food Act of 2022 would implement three amendments to the Internal Revenue Code of 1986.
First, the FIND Food Act offers a tax incentive for transportation of donated food. One of the most expensive barriers to donating excess food faced by businesses is the cost of transportation. Currently, donors are unable to receive a tax deduction for transportation costs. By including transport services for donated food as a separate cost eligible for an enhanced tax deduction of up to 100% of the costs paid or incurred by the taxpayer in connection with transportation of the donation, the Act will help businesses, farmers, and food rescue organizations to bring surplus food to food-insecure individuals around the country.
Second, the Act creates an alternative tax credit that farmers can claim in lieu of the enhanced deduction for food donation. The Act would allow farmers to claim a reimbursable tax credit equal to 50% of the fair market value of the donated food. On-farm food loss represents an enormous quantity of food waste—roughly 16.7 million tons/year—as well as a tremendous opportunity for food donations if surplus produce were to be harvested and donated. However, the current tax deduction does not effectively incentivize farmers to harvest and donate excess crops. Farmers often operate within low profit margins and do not make enough income to claim a tax deduction, so many farmers are unable to make use of the existing enhanced deduction. Farmers who do donate food without the deduction are forced to bear all costs of donation—including harvesting, storing, transporting the food—without a financial incentive. Further, farmers that do attempt to claim the donation often find the process of calculating the deduction onerous. To incentivize farmers to donate surplus crops and offset some of the costs of donation, the Act provides for an alternative reimbursable tax credit that farmers can claim, even if their taxes are not high enough to reduce their payment, instead of the existing enhanced deduction.
Finally, the Act would expand the charitable tax deduction for contributions of food inventory by allowing the incentive to be available for food donations to a nonprofit organization even when the nonprofit offers the food to end recipients at a low price. Under current law, the enhanced tax deduction for food donations can only be claimed when food is donated to a non-profit that does not charge the end recipient anything for the food. This hampers donations to innovative recipients such as social supermarkets that sell donated food at an extremely discounted price or food rescue organizations that charge recipients a minimal fee to help offset the costs of home delivery. The FIND Food Act of 2022 will incentivize further food donations by allowing donors to receive the enhanced tax deduction for donations to non-profits that offer food either for free or at a “Good Samaritan Reduced Price,”—a price no greater than the cost of handling, administering, and distributing such food.
These improvements to the existing federal enhanced tax deduction could lead to significant increases in food donation by providing the necessary flexibility to encourage farmers, corporations, restaurants, business owners, and food recovery organizations to distribute food to those who need it most. The Food Law & Policy Clinic encourages the rest of Congress to pass the FIND Food Act of 2022 to promote food donation while reducing senseless food waste.