2016 Tax Deduction Updates
Great News! The PATH ACT (“Protecting Americans from Tax Hikes") just passed in December, 2015 is federal legislation designed to make donating excess produce to a nonprofit like South Central Community Action Programs - under which The Gleaning Project is housed - easier and more financially rewarding for small and mid-sized growers.
Hoo. Ray : D
Tax law prior to 2016 was not particularly helpful to small and mid-sized farm businesses that wanted to donated produce...
... Most of The Gleaning Project’s growers have been donating - not because there was a financial incentive - but because they felt it was the right thing to do. Improvements within the PATH Act help with that financial incentive piece.
This act includes language from a former bill (The America Gives More Act) that The Gleaning Project lobbied for in 2015.
We are very happy and encouraged to see these changes being made at the national level and want our local growers to know about them too.
Now, as of 2016:
- Small businesses (including LLC’s) that donate wholesome excess food to 501(c)(3) nonprofits may take the same enhanced tax deduction C corporations have been permitted to take since 1976.
- Donors can receive tax benefits for donated food up to 15% of their adjusted gross income.
- Donations that can’t or won’t be sold - due to product being out of specification or overproduced - can be valued at the same price as other similar items sold at the same time.
- Donors that use cash basis accounting can take the enhanced tax deduction through a new, special rule for valuing their food inventory (see below for that rule).
Expanding the applicability of tax benefits to all producers and making those changes permanent can allow farmers to incorporate donation as a regular part of crop planning - either for produce grown specifically for donation or as an outlet for unmarketable product.
Good food that you grow, but can’t profit from on the market, can easily be donated to The Gleaning Project. We take care of the labor, container, and transport for all donations so growers don’t have to worry about it or waste any more time or expense. We track all donations and provide timely, accurate receipts. And we’ll make sure our grower donors have all the information they need at the end of the year for their accounting purposes.
This is how we all help reduce hunger and improve nutrition in our community.
A letter with these details and more information will be going out to all The Gleaning Project's growers by the end of this month.
Any questions, please comment below or email firstname.lastname@example.org.
* Special thanks to Carrie Calvert, Director of Tax and Commodity Policy at Feeding America. Her presentation at this year’s Mid-Atlantic Fruit and Vegetable Convention in Hershey, PA was incredibly helpful.
* For more information:
- Feeding America - “2016 Changes to Food Donation Tax Incentives”
- Feeding America – “Federal Tax Incentives for Produce Donations”
- PATH Act language itself - “Protecting Americans from Tax Hikes Act of 2015”
- The Gleaning Project re. last year’s “America Gives More Act” – “Gleaners Get into Tax Policy”
* To calculate the enhanced tax benefit for donated produce:
Enhanced Tax Benefit for donated food = Cost of Goods Sold + 1/2 the Unrealized Appreciation
- Cost of Goods Sold = Grower donor’s cost of production (standard value is 25% of Fair Market Value)
- Unrealized appreciation = Gross profit had you sold that food on the market (Fair Market Value - Cost of Goods Sold)
- Special note: The maximum deduction cannot exceed two times the cost of goods sold.
This information does not constitute tax advice. Please contact your tax advisor to confirm eligibility for federal food donation tax incentives as specified by Internal Revenue Code 170e3.
South Central Community Action Programs, Inc. (SCCAP) is a 501(c)(3) nonprofit organization and donations are tax deductible as allowed by law.