Author: Stephen D Hans & Associates

Food waste is a problem that restaurants and other businesses in the food industry have grappled with for years.

An article entitled “It’s Time to Rethink Restaurant Food Waste” points out that 84 percent of the food waste restaurants generate ends up in land fills. A corporation with a billion dollar revenue loses money on more than 3 million pounds of food that it pays for but does not use. A 15.7 percent food loss exists across the food industry.

Donating food to charities is a way to offset the loss and help the needy at the same time.

Congress Passed a Law that Increases Tax Incentives against Food Waste

In December of 2015, Congress passed the PATH ACT, which improved the tax incentives for food donation.

Here is how the law improved tax incentives:

• Now not only C corporations but other corporations can also carry forward the deductions for five years, the same way C corporations do.
• Farmers can claim 25 percent of the donated food’s fair market value as the food production cost and so can other “cash method” accounting taxpayers.
• The allowable charitable contributions cap was raised from 10 percent to 15 percent.

This change for C corps is permanent and it also included 2015 donations made by corporations that were not C corps. The law creates an advantage for small and mid-sized restaurant owners, enabling them to donate food to charities and write off a percentage of the donation for up to 15 percent of their adjusted gross income.

Lucky Stores Inc, v. Commission of Internal Revenue is also case that affected charity donations and tax write offs. It was fundamental in establishing the fair market value (FMV) of unused food.

Stephen Hans & Associates is an employment litigation firm that assists restaurant owners and defends small and medium sized businesses in discrimination, labor law and other employment related matters.