Specialty Food Magazine


Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.

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Page 113 of 139

BY JULIE GALLAGHER Getting the Most Out of Your Food Donations "If you're a donor or a food recovery organization, you know that there is quite a significant cost that can go with donating food," said Christina Rice, an attorney at the Harvard Food Law and Policy Clinic, which endeavors to reduce waste of healthy, whole- some foods, during a presentation at the inaugural NYC Food Waste Fair in Brooklyn, N.Y. "So having some type of incentive to somewhat offset that cost is really helpful. Especially for encourag- ing people to implement a food-donation program." Rice explained that there are two federal tax incentives avail- able to donors. The first is a general deduction, which is the standard deduction that they can apply to their individual taxable income. It is also applicable to businesses. The amount is equal to the cost of acquiring the food. "It's usually not the fair market value, but lower than that," explained Rice. The second is an enhanced tax deduction which is just for the donation of food. Although it's been around for some time, it was changed in 2015 to apply to all businesses. "Previously, it was limited to C corporations … but now C corps, S corps, LLCs, and all the different business structures can take advantage," she said. "It's called an enhanced tax deduction because it basically provides double the amount of incentive of the general deduction." The enhanced tax deduction allows businesses to deduct the lesser of: 1. Twice the basis value of the donated food OR 2. The basis value of the donated food plus one-half of the food's expected profit margin For instance, if a grocery store donates a bag of potatoes that it had acquired for $30, but whose fair market value is $100, (and whose profit margin would have been $70), it would be eligible to deduct $60 (see below). Under the general deduction, only the basis value, or $30, is deductible. 1. Basis Value x 2 = $30 x 2 = $60 2. Basis Value + (expected profit margin/2) = 30 + ($70/2) = $65 To receive the enhanced deduction, companies must meet four main requirements: The Donor Organization must donate food to a qualified domestic 501(c)(3) nonprofit organization that uses food solely for the care of the ill, the needy, or infants (a minor child as determined by local law). The Donated Food must be used in a manner consistent with the purpose of the organization's exempt 501(c)(3) status. The Recipient Organization may not use or transfer the food in exchange for money, other property, or services. "The nonprofit that is distributing the food to a food pantry specialty food maker Tax benefits and liability protections make food donations even more of a win/win. T he intentions surrounding food donation are often altruistic, with benefits ranging from environmental to social. But new and existing tax benefits are helping incent food donors by allowing them to recuperate some of the costs associated with their food donations. WINTER 2018 111

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