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AMERICAN BAR ASSOCIATION
SECTION OF CIVIL RIGHTS AND SOCIAL JUSTICE
COMMISSION ON HOMELESSNESS AND POVERTY
REPORT TO THE HOUSE OF DELEGATES
RESOLUTION
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RESOLVED, That the American Bar Association urges Congress to enact legislation to
make permanent the tax deduction for donation of wholesome food inventory as
previously codified in Internal Revenue Code section 170(e)(3)(C).
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REPORT
This Resolution urges Congress to make permanent the IRC §170(e)(3)(C) charitable tax
deduction for donation of wholesome food inventories from any trade or business, not
just C corporations. Congress has renewed the deduction year by year until the end of
2014, when it did not. Specifically, early in 2015, HR 644, Section 2, the Fighting
Hunger Incentives Act, was introduced in Congress as part of the America Gives More
Act. After passing in the House, the bill was sent to the Senate, but the provisions were
replaced by the Trade Facilitation and Enforcement Act of 2015. Thus, small businesses
will not receive a tax deduction for food donations in 2015.
In general, an income tax deduction is permitted for charitable contributions, subject to
certain limitations that depend on the type of taxpayer, the property contributed, and the
recipient organization. IRC provisions pertaining to charitable contribution deductions
for donation of food inventories are separate from provisions defining the cost basis of
inventories used to determine taxable gain, although to use the enhanced deduction that
would have been provided by Section 2 of H.R. 644 a taxpayer would need to establish
that the fair market value of the donated item exceeds the cost basis.
Without further action by Congress to extend or make permanent the deduction for food
inventories as envisioned in HR 644, Section 2, much food that could feed persons
experiencing food insecurity in this country may simply be thrown out. The cost of
properly saving, packaging, labelling, storing, and delivering this unused food to
distribution centers, in many cases, is prohibitive for small businesses and sole
proprietorships.1 The enhanced tax deduction for donation of food inventories allows
them to offset some of that expense, making more of this food available to charitable
organizations.
Until December 31, 2014, IRC §170(e)(3)(C) provided:
Special Rule for Contributions of Food Inventory —
(i) General Rule.—In the case of a charitable contribution of food from
any trade or business of the taxpayer, this paragraph shall be applied—
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According to the United Nations Environment Programme September 2015 Report, in the USA,
organic waste is the second highest component of landfills, which are the largest source of
methane emissions. In the USA, 30-40% of the food supply is wasted, equaling more than 20
pounds of food per person per month.
Although the numbers of businesses deterred from donating food inventories by the lack of a tax
deduction is not precisely known, it can be inferred from data on waste. For example, Feeding
America, an organization that supported the food donation tax deduction provisions in the
America Gives Back Act before Congress, reports that, according to U.S. Environmental
Protection Agency data, an estimated 25 – 40% of food grown, processed and transported in the
US will never be consumed (website).
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(I) without regard to whether the contribution is made by a C
corporation, and
(II) only to food that is apparently wholesome food.
(ii) Limitation.—In the case of a taxpayer other than a C corporation, the
aggregate amount of such contributions for any taxable year which may be
taken into account under this section shall not exceed 10 percent of the
taxpayer’s aggregate net income for such taxable year from all trades or
businesses from which such contributions were made for such year,
computed without regard to this section.
(iii)Apparently Wholesome Food.—For purposes of this subparagraph, the
term “apparently wholesome food” has the meaning given to such term by
section 22(b)(2) of the Bill Emerson Good Samaritan Food Donation Act
(42 U.S.C. 1791(b)(2), as in effect on the date of the enactment of this
subparagraph.
(iv) Termination.—This subparagraph shall not apply to contributions
made after December 31, 2013.
The version of Section 2 of H.R. 644 that passed the House provided:
An Act
To amend the Internal Revenue Code of 1986 to permanently extend and
expand the charitable deduction for contributions of food inventory.
Sec. 2.
Extension and Expansion of Charitable Deduction for
Contributions of Food Inventory.
(a) Permanent Extension- Section 170(e)(3)(C) of the Internal Revenue
Code of 1986 is amended by striking clause (iv).
(b) Increase in Limitation – Section 170(e)(3)(C) of such Code, as
amended by subsection (a), is amended by striking clause (ii), by
redesignating clause (iii) as clause (iv), and by inserting after clause (i) the
following new clauses:
(ii) Limitation – The aggregate amount of such contributions for
any taxable year which may be taken into account under this
section shall not exceed—
(I) in the case of any taxpayer other than a C corporation, 15
percent of the taxpayer’s aggregate net income for such taxable
year from all trades or businesses from which such contributions
were made for such year, computed without regard to this section,
and
(II) in the case of a C corporation, 15 percent of taxable income
(as defined in subsection (b)(2)(D)).
(iii) Rules Related to Limitation –
(I) Carryover – If such aggregate amount exceeds the limitation
imposed under clause (ii), such excess shall be treated (in a manner
consistent with the rules of subsection (d)) as a charitable
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contribution described in clause (i) in each of the 5 succeeding
taxable years in order of time.
(II) Coordination With Overall Corporate Limitation – In the case
of any charitable contribution allowable under clause (ii)(II),
subsection (b)(2)(A) shall not apply to such contribution, but the
limitation imposed by such subsection shall be reduced (but not
below zero) by the aggregate amount of such contributions. For
purposes of subsection (b)(2)(B), such contributions shall be
treated as allowable under subsection (b)(2)(A).
(c) Determination of Basis for Certain Taxpayers – Section 170(e)(3)(C)
of such Code, as amended by subsections (a) and (b), is amended by
adding at the end the following new clause:
(v) Determination of Basis for Certain Taxpayers – If a
taxpayer—
(I) does not account for inventories under section 471, and
(II) is not required to capitalize indirect costs under section 263A,
the taxpayer may elect, solely for purposes of subparagraph (B), to
treat the basis of any apparently wholesome food as being equal to
25 percent of the fair market value of such food.
(d) Determination of Fair Market Value – Section 170(e)(3)(C) of such
Code, as amended by subsections (a), (b), and (c), is amended by adding at
the end the following new clause:
(vi) Determination of Fair Market Value – In the case of any such
contribution of apparently wholesome food which cannot or will
not be sold solely by reason of internal standards of the taxpayer,
lack of market, or similar circumstances, or by reason of being
produced by the taxpayer exclusively for the purposes of
transferring the food to an organization described in subparagraph
(A), the fair market value of such contribution shall be
determined—
(I) without regard to such internal standards, such lack of market,
such circumstances, or such exclusive purpose, and
(II) by taking into account the price at which the same or
substantially the same food items (as to both type and quality) are
sold by the taxpayer at the time of the contribution (or, if not so
sold at such time, in the recent past).
(e) Effective Date –
(1) In General – Except as otherwise provided in this subsection, the
amendments made by this section shall apply to contributions made after
the date of the enactment of this Act, in taxable years ending after such
date.
(2) Limitation; Applicability to C Corporations – The amendments made
by subsection (b) shall apply to contributions made in taxable years ending
after the date of the enactment of this Act.
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While Congress’s failure to pass HR 644, Section 2 resulted in the unavailability of the
deduction for 2015, Congress’s past practice of annually terminating and renewing the
deduction in IRC §170(e)(3)(C) was also problematic, as it served as a deterrent to food
inventory donations because of the uncertainty that the deduction would be renewed and
available for a particular tax year. Consequently, it is important that Congress remove
the sunset provision and make the deduction a permanent tax incentive to encourage
better utilization of our resources in addressing one of the primary manifestations of food
insecurity, a lack of wholesome food.
In 2014, the ABA House of Delegates adopted Resolution 107 urging the United States
government to make the realization of a human right to adequate food a principal
objective of U.S. domestic policy. As the Report in support of that Resolution stated,
17.6 million households have difficulty feeding their families, and 7 million of those
families suffer from “very low food security,” affecting some 49 million people. Making
permanent the tax deduction for donation of food inventories will provide one tool to
address this need.
The Section of Civil Rights and Social Justice asks the House of Delegates to adopt this
Resolution to urge Congress to enact legislation making the tax incentive for donation of
wholesome food inventories a permanent part of the Internal Revenue Code.
Respectfully Submitted,
Lauren Stiller Rikleen, Chair
ABA Section of Civil Rights and Social Justice
February 2016
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GENERAL INFORMATION FORM
Submitting Entity: SECTION OF CIVIL RIGHTS AND SOCIAL JUSTICE (CRSJ)
Submitted By: Lauren Stiller Rikleen, Chair, ABA Section of Civil Rights and Social
Justice
1. Summary of Resolution(s). The American Bar Association urges Congress to enact
legislation to make permanent the tax deduction for donation of wholesome food
inventory as previously codified in Internal Revenue Code section 170(e)(3)(C).
2. Approval by Submitting Entity. The Executive Committee of the Section of Civil
Rights and Social Justice approved the filing of this resolution on Wednesday, Nov.
18, 2015.
The Commission on Homelessness and Poverty approved co-sponsorship of this
resolution on Thursday, Dec. 3, 2015.
3. Has this or a similar resolution been submitted to the House or Board previously? No.
4. What existing Association policies are relevant to this Resolution and how would
they be affected by its adoption? In August 2014, the House of Delegates passed a
resolution urging the United States government to make the realization of a human
right to adequate food a principal objective of U.S. domestic policy. ABA
Resolution 107 (Aug. 2014).
5. If this is a late report, what urgency exists which requires action at this meeting of the
House? N/A
6. Status of Legislation. (If applicable) Early in 2015, HR 644, Section 2, the Fighting
Hunger Incentives Act, was introduced in Congress as part of the America Gives
More Act. After passing in the House, the bill was sent to the Senate, but the
provisions were replaced by the Trade Facilitation and Enforcement Act of 2015.
7. Brief explanation regarding plans for implementation of the policy, if adopted by the
House of Delegates. If passed, the Section would work with the ABA Governmental
Affairs Office to make Congress aware of this policy and urge the enactment of
legislation.
8. Cost to the Association. (Both direct and indirect costs).
Adoption of this Resolution would result only in minor indirect costs associated with
staff time devoted to the policy subject matter as part of the staff members’ overall
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substantive responsibilities, and the costs of updating documents which list the
Association’s goals.
9. Disclosure of Interest. (If applicable). There are no known conflicts of interest.
10. Referrals. The Section has worked with the Section of Taxation and the Commission
on Homelessness and Poverty on this Resolution and Report.
By copy of this form, the Resolution also will be referred to the following entities:
Section of Business Law
Section of State and Local Government Law
Government and Public Sector Lawyers Division
Law Practice Division
Law Student Division
Senior Lawyers Division
Solo, Small Firm and General Practice Division
Young Lawyers Division
11. Contact Name and Address Information. (Prior to the meeting. Please include name,
address, telephone number and e-mail address)
Lauren Stiller Rikleen, Chair
ABA Section of Civil Rights and Social Justice
Rikleen Institute for Strategic Leadership
87 Sears Rd
Wayland, MA 01778-1706
Tel.: 508/259-3500 (cell)
Tel: 508/358-6115 (home)
E-mail: laurenr@bc.edu
Tanya N. Terrell, Section Director
ABA Section of Civil Rights and Social Justice
1050 Connecticut Avenue, NW
Suite 400
Washington, DC 20036
Tel: 202/662-1593
Cell: 703/888-8022
E-mail: tanya.terrell@americanbar.org
Marilyn Harbur, Vice Chair, CRSJ Committee on Economic Justice
Department of Justice
1162 Court St NE, Salem, OR 97301
Tel: 503-947-4485
Email: marilyn.harbur@state.or.us
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12. Contact Name and Address Information. (Who will present the report to the House?
Please include name, address, telephone number, cell phone number and e-mail
address.)
Estelle H Rogers, Delegate
ABA Section of Individual Rights and Responsibilities
111 Marigold Ln
Forestville, CA 95436-9321
Tel: 202/337-3332
Cell: 202/337-3332
E-mail: 1estellerogers@gmail.com
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EXECUTIVE SUMMARY
1.
Summary of the Resolution
This Resolution urges Congress to enact legislation to make permanent the tax deduction
for donation of wholesome food inventory as previously codified in Internal Revenue
Code section 170(e)(3)(C).
2.
Summary of the Issue that the Resolution Addresses
Small businesses and sole proprietorships throw away unsold inventories of wholesome
food that could be donated to the nation’s food pantries if the costs of storage, packaging
and delivery were not prohibitive. Making permanent the federal income tax deduction
for donation of food inventories would offset these costs and eliminate the uncertainty of
the previous annual sunset provision in the law.
3.
Please Explain How the Proposed Policy Position will address the issue
This Resolution would allow the ABA Governmental Affairs Office to lobby Congress
for legislation, such as that passed by the U.S. House of Representatives earlier this year,
making permanent the tax deduction for charitable donation of food inventories.
4.
Summary of Minority Views
No minority views or opposition have been identified at this time.
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