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 114 of 139

Julie Gallagher is managing editor of Specialty Food Magazine. can, however, charge a nominal fee for the cost of warehousing or transporting that food, but there can't be anything exchanged with the end recipients to receive that food," said Rice. Food Donations must satisfy requirements under the federal Food, Drug & Cosmetic Act at the time the contribution was made, as well as for 180 days preceding the contribution. "The food can't be adulterated, so it can't be contaminated, it can't be tainted, and it needs to be food that you would consume, and then it can't be misbranded," explained Rice, who added that the labeling requirements for prepared foods are slightly different. Paperwork Requirements The business donating food must also receive a written statement from the recipient organization including a description of what was donated; a statement that the food will be used in compliance with the above requirements; a statement that the recipient is recognized as exempt from federal income tax under I.R.C. 501(c)(3); and a statement that adequate books and records will be maintained and made available to the IRS upon request. Updates to the Enhanced Deduction A couple of updates to the enhanced deduction, that make it easier for businesses to calculate the value of their food donations, went into effect in 2016. "They added two provisions for clarifying the fair market value," Rice explained. The first makes it easier for businesses that don't account for inventories, such as farmers who follow a cash basis accounting model, to calculate their deduction. They now have the option to calculate the basis value at 25 percent of the products' fair market value (the value at which goods can be sold). The second involves donated products that would fall into a secondary market, such as a blemished peach that may not meet cosmetic standards due to shape variation. "The change states that the donor can set the fair market value at the same or substantially similar [to that of a peach] that meets cosmetic standards," said Rice. The change also permits calculating a fair market value for candy that is donated the day after Halloween that is similar to the fair market value of candy sold the day before Halloween. Tax Credits Different states also offer different incentives for food donation and some are pushing tax credits as opposed to deductions, which provide a bigger benefit, especially to companies with razor thin profit margins, according to Rice. New York included in its 2017-18 budget the Farm to Food Bank Tax Credit which allows farmers in the state to claim up to $5,000 annually through a refundable tax credit equal to 25 percent of the wholesale value of their donations to emergency food programs, according to reports. The program is expected to have a big impact since millions of pounds of fresh fruits and vegetables go unharvested in the state each year due to aesthetic imperfections and other factors. Liability Concerns Despite these tax benefits, half of food manufacturers and one- quarter of retailers and wholesalers cite liability concerns as one of the main barriers to food donation, said Rice. "A lot of people are worried about donating food since they're worried about being sued," she said. But much of the anxiety is for naught. Rice explained that the federal Bill Emerson Good Samaritan Act extends civil and criminal liability protection to food donors and distributing nonprofits as long as they meet the following requirements, which are similar to those required to take advantage of the enhanced deduction: 1. Donated food is "apparently wholesome." "This means that the food has to meet all quality and labeling standards at the local, state, and federal levels," said Rice. 2. Donated in good faith. "The donor needs to donate food with an honest belief that the food isn't contaminated or tainted in some way." 3. Used to benefit needy individuals. "The distributing non- profit needs to distribute food to needy individuals, so if you're a food bank or food shelter, it should be going to needy people and it shouldn't be going to a for-profit business." 4. No fee charged. "The nonprofit who is distributing the food can't charge the end recipient any price for that food. And there has to be a distributing nonprofit. So if you are a restaurant and there is a housing authority nearby where you wanted to donate food directly, you couldn't do so. You'd have to go through a distributing nonprofit." In addition to protections that exists under the federal act, some individual states go above and beyond its protections, according to Rice. "Some states' protections are exactly like the Emerson Act while others provide protections for direct donation. Some states as well provide protection if the distributing nonprofit actually wants to charge the end recipients the price of the food, at cost, or they have different methods for determining those amounts," she said. specialty food maker "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. So having some type of incentive to somewhat offset that cost is really helpful." 112 ❘ SPECIALTY FOOD MAGAZINE specialtyfood.com

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