The following information is presented for general information only. Consult with your Attorney or Tax Consultant to determine its application to your specific organization and situation.
Current Tax Law
U.S. Congress enacted Section 170 of the Internal Revenue Code in 1976 to encourage donations by allowing C corporations to earn an enhanced tax deduction for donating selected surplus property, including food. In 2015, Congress passed the PATH Act as Division Q of the Consolidated Appropriations Act, 2016, which modified Section 170 of the Internal Revenue Code to allow all companies to earn an enhanced tax deduction for donating selected surplus property, including food.
This encourages food donations by:
1. Making the enhanced tax deduction permanently available for Non-C corporations – retroactive for contributions made after December 31, 2014.
2. Increasing the charitable contributions cap from 10% to 15% of net income for Non-C corporations or taxable income for C corporations – applicable to taxable years beginning after December 31, 2015. The additional 5% is specifically for food donations.
3. Allowing Non-C corporations a tax deduction carry forward of 5 years, mirroring the treatment of C corporations – applicable to taxable years beginning after December 31, 2015.
4. Defining the Fair Market Value for donated food by taking into account the price for which the item is sold at the time of the contribution without regard to lack of market, internal standards – applicable to taxable years beginning after December 31, 2015.
5. Providing basis for food donations from businesses using the cash method of accounting (typically identified as “farmers and ranchers”) as 25% of the fair market value – applicable to taxable years beginning after December 31, 2015.
See an explanation of how this enhanced tax deduction applies to donation of wholesome food.
Technical Tax Correction for S Corporations
Prior to December of 2007, S corporations with limited shareholder basis faced a dilemma regarding their ability to take the enhanced tax deduction for donating food inventory. FDC submitted a technical correction to the House Committee on Ways and Means in 2007 which was integrated into The Tax Technical Corrections Act of 2007 (HR 4839 and Public Law 110-172). This made a technical correction to the provision relating to contributions of appreciated property by an S corporation.
The technical correction provides that the present-law basis limitation on the deduction of S corporation items does not apply to a contribution of appreciated property to the extent the shareholder’s pro rata share of the contribution exceeds the shareholder’s pro rata share of the adjusted basis of the property. This means that S corporation shareholders can take the enhanced deduction regardless of their basis in the corporation.
It is up to our donors and non-profits to practice food safety.
Critical Food Handling Temperatures:
Foods are most susceptible to microbial spoilage between the temperatures of 41°F and 140°F. Place food to be donated in food safe plastic bags or food safe, sanitized, shallow containers with a product depth (or width) of less than 4 inches. Immediately store under refrigeration (or freezing). It is critical that the temperature of the food is 41°F or lower within 4 hours. Reheat foods to an internal temperature of at least 165°F or higher for at least 15 seconds. If this temperatures is not reached within 2 hours, discard.
Cooked food must NOT BE HELD at temperatures between 140°F and 41°F.
Shelf Life Standards
Method Temperature Maximum Storage Time
Cooler 35°F – 41° 72 hours
Freezer 0°F – (± 10°F) 1 Week
All donated surplus food must be labeled. Surplus food for donation must be stored in food safe plastic bags or food safe containers. A food donation label should be attached to each bag or container. This label should include donor name and location, description of the item, as well as the date and time it was saved.
Product Storage at Restaurant or Food Service Establishment
Food that is to be donated Food Safe Bag should be placed in approved food-safe plastic bags or containers, Cambro (r) Pan and labeled with the date and time of storage. This food should then be placed in the walk-in cooler, refrigerator or freezer immediately to avoid spoiling (some agencies would prefer product to be frozen). Product to be donated should be kept at a temperature below 41°F at all times after it is placed into a container. Use approved handling procedures at all times regardless of the amount of food being donated.
Storage and Transportation System: Cambro (r) Pan
Food Safe Bag The storage and transportation containers and approved food-safe plastic bags provide a system by which product can be saved and transported in a clean and food safe manner.
Cleans & sanitizes any food pans & covers used in storing or transportation of donated food.
2. Food Rescue Program or Agency
Returns any food containers used to store surplus food to restaurant.
3. Restaurant or Food Service Establishment
Identifies surplus food for donation
Ensures that food is placed in food safe plastic bags or approved containers and labeled with contents and date and time of storage.
Places surplus food in freezer or cooler
4. Food Rescue Program or Agency
Picks up surplus food per determined pickup schedule and transports to agency using approved transport carrier (if applicable).
Serves product to the needy under food safe conditions.
6. Cycle repeats – Go to step 1
Recommended Items for transport: