After the House Committee on Ways and Means’ late-May approval of “Fighting Hunger Incentive Act of 2014,” many restaurants are awaiting passage in Congress to make tax deductions on charitable food donations permanent.
For nearly 30 years since its inception in 1976, the provision’s tax deductions on charitable food donations were limited to C corporations. And since 2005, it has been temporarily expanded to other entities.
“In the restaurant industry, particularly in our NRA membership, approximately two-thirds of our members are organized in another manner other than C corporations, as partnerships, or S [corporations], or as single tax payers,” says Dave Koenig, vice president of tax and profitability for the National Restaurant Association (NRA). “So the expansion of the enhanced deduction to cover all taxpayers has provided a much bigger expansion of the program, and it’s resulted in a large number of our members who would otherwise not get the benefit of the provision being able to take advantage of it.”
However, since the provision has only been temporarily expanded over the last several years, it was allowed to lapse.
“Certainly for a provision that encourages companies to currently donate this food to charity, it doesn’t make much sense to be playing around with the provision the way Congress has done,” Koenig says.
According to NRA research, 84 percent of companies donate food to individuals or charities, and Koenig says that since the provision has been temporarily expanded, that number has increased.
With the deductions, restaurants are able to offset the cost of transporting and storing surplus food for donations, in addition to adding jobs and making improvements to existing restaurants, Koenig says.
The Joint Tax Committee estimate for the provision’s deductions on tax revenue is $900 million over five years and $1.9 billion over 10 years.
By Alex Dixon