AB 152
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Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 152 (Fuentes) – As Amended: April 14, 2011
Majority vote. Fiscal committee.
SUBJECT: Food banks: grants: voluntary contributions: income tax credits
SUMMARY: Requires the State Department of Social Services to establish and administer a
State Emergency Food Assistance Program, as specified. Specifically, the tax-related provisions
of this bill:
1) Allow a tax credit, under both the Personal Income Tax Law and the Corporation Tax Law,
to "qualified taxpayers" who donate fresh fruits or fresh vegetables to a food bank located in
California under Food and Agriculture Code (FAC) Section 58501 et seq.
2) Provide that the credit shall be equal to 10% of the cost included in inventory costs under
Internal Revenue Code (IRC) Section 263A, or that would be required to be included in
inventory costs but for the exception for farming businesses contained in IRC Section
263A(d), with respect to those fresh fruits or fresh vegetables. (Generally, inventory costs
would include both the direct costs and the allocated indirect costs required to produce the
fresh fruits or vegetables.)
3) Define a "qualified taxpayer" as the person responsible for planting a crop, managing the
crop, and harvesting the crop from land.
4) Provide that, if the credit is claimed, any deduction otherwise allowed for that amount of the
cost that is eligible for the credit shall be reduced by the amount of the credit.
5) Provide that, upon receipt of the donated fresh fruit or fresh vegetables, the nonprofit
organization shall provide a certificate to the donor. This certificate shall contain a signed
statement that the product is donated under FAC Section 58501 et seq. The certificate shall
also contain the type and quantity of product donated, the name of the donor or donors, and
the name and address of the donee.
6) Provide that, in cases where the credit exceeds the taxpayer's tax liability, the excess credit
amount may be carried over to the next year, and the succeeding six years if necessary, until
the credit is exhausted.
7) Provide that, to the extent data are available, the Franchise Tax Board (FTB) shall report to
the Legislature regarding the utilization of the credit.
8) Apply to taxable years beginning on or after January 1, 2012, and before January 1, 2017.
9) Are automatically repealed on December 1, 2017.
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EXISTING LAW:
1) Allows for the deduction of all ordinary and necessary expenses of a trade or business.
2) Allows taxpayers to claim a deduction for charitable contributions made to qualified
organizations. For corporations, the deduction is generally limited to 10% of net income.
3) Provides special rules for contributions of food inventory.
4) Provides a credit equal to 50% of the transportation costs paid or incurred in transporting any
donated agricultural product to a nonprofit charitable organization.
FISCAL EFFECT: The FTB has not yet provided a revenue estimate for this bill.
COMMENTS:
1) The author has provided the following statement in support of this bill:
AB 152 would increase access to fresh and healthy California-grown foods for lowincome Californians by creating a state emergency food assistance program for the
purchase and distribution of healthy California food to low-income communities, and by
providing a tax credit to California growers who donate fresh fruits and vegetables to
California food banks. It also works to remove administrative barriers in getting obesity
prevention dollars into California communities in a quicker fashion by providing grant
making authority to the California Department of Public Health.
2) Proponents state, "More than 20 percent of Californians (over 7 million) report they are
unable [to] afford the food they need – including many seniors and working parents whose
budgets for food are squeezed by the economic downturn and slow recovery. Food banks
across the state have experienced an unprecedented increase in requests, beyond anything
seen in a generation. Meanwhile, many healthy foods remain out of reach to low-income
Californians because of their high cost."
3) FTB notes, "Although farmers would generally be required to use the inventory cost method
as set forth in IRC section 263A, an election to opt out of the inventory cost method is
available to certain farmers. For example, sole proprietorships that are not required to use
the accrual method of accounting could be allowed to elect out of the application of IRC
section 263A. Because these farmers would be required to recalculate the cost of the donated
agricultural product in order to report the credit, some targeted taxpayers may choose not to
claim this credit."
4) Committee Staff Comments:
a) What is a "tax expenditure"?: Existing law provides various credits, deductions,
exclusions, and exemptions for particular taxpayer groups. In the late 1960's, United
States Treasury officials began arguing that these features of the tax law should be
referred to as "expenditures," since they are generally enacted to accomplish some
governmental purpose and there is a determinable cost associated with each (in the form
AB 152
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of foregone revenues). This bill would enact a tax expenditure, in the form of an income
tax credit, designed to incentivize the donation of healthy produce to food banks to
reduce the devastating impact of hunger on adults, children, and seniors in California.
b) How is a tax expenditure different from a direct expenditure?: As the Department of
Finance notes in its annual Tax Expenditure Report, there are several key differences
between tax expenditures and direct expenditures. First, tax expenditures are reviewed
less frequently than direct expenditures once they are put in place. This can offer
taxpayers greater certainty, but it can also result in tax expenditures remaining a part of
the tax code without demonstrating any public benefit. Second, there is generally no
control over the amount of revenue losses associated with any given tax expenditure.
Finally, it should also be noted that, once enacted, it generally takes a two-thirds vote to
rescind an existing tax expenditure absent a sunset date. This effectively results in a
"one-way ratchet" whereby tax expenditures can be conferred by majority vote, but
cannot be rescinded, irrespective of their efficacy, without a supermajority vote.
5) Related legislation:
a) AB 727 (Correa), of the 2001-02 Legislative Session, would have established a tax credit
equal to 10% of the normal inventory costs for the donation of agricultural products to a
food bank located in Fresno, Orange, or Santa Cruz Counties. AB 727 failed to pass out
of the Senate Committee on Revenue and Taxation.
b) AB 287 (Strickland), of the 1999-2000 Legislative Session, would have established a
credit equal to 10% of the wholesale value of agricultural products donated by a taxpayer
to a nonprofit charitable organization or food bank. AB 287 was held by the Assembly
Committee on Appropriations.
c) AB 196 (Thomson), of the 1997-98 Legislative Session, would have established a tax
credit equal to 20% of the cost of agricultural products donated to a nonprofit charitable
organization. AB 196 was held by the Senate Committee on Appropriations.
d) AB 364 (Cannella), of the 1995-96 Legislative Session, would have, among other things,
established a tax credit equal to 10% of the cost of food donated to nonprofit charitable
organizations. AB 364 was held by the Senate Committee on Appropriations.
e) AB 2346 (Kelley), Chapter 1248, Statutes of 1989, established a very similar tax credit
for the donation of agricultural products to certain nonprofit charitable organizations.
This credit was repealed by its own terms on December 1, 1992.
6) Double-referral: This bill was double-referred to the Assembly Committee on Health, which
passed this bill out on a 19-0 vote on March 22, 2011. For additional discussion of AB 152,
please refer to that committee's analysis of the bill.
REGISTERED SUPPORT / OPPOSITION:
Support
Alameda County Community Food Bank
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American Federation of State, County and Municipal Employees, AFL-CIO
California Association of Food Banks
California Communities United Institute
California Food Policy Advocates
California Hunger Action Coalition
Community Action Agency of Butte County, Inc.
Community Food Bank
Community Food Bank of San Benito County
Food Bank of Contra Costa and Solano
Food Bank for Monterey County
Foodbank of Santa Barbara County
HMC Farms
Hunger Action Los Angeles
Imperial County Food Bank
Interfaith Council of Amador
Los Angeles Regional Foodbank
Mendocino Food and Nutrition Program
Meyers Farms Family Trust
Ocean Mist Farms
Orange County Food Bank
Prima Frutta Packing, Inc.
Prime Time International
Quality Packing
San Francisco Food Bank
Second Harvest Food Bank of Orange County
Second Harvest Food Bank of Santa Clara and San Mateo Counties
Simonian Fruit Company
T.D. Produce Sales
Van Groningen and Sons, Inc.
Vessey and Company, Inc.
Opposition
None on file
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098