Incentives Watch: Farmers Gonna Farm, Several States Hope They Are Also Going to Make Food Donations

For many of us, getting a healthy and delicious meal is just a matter of walking down to the grocery store, hitting up a restaurant or pulling up an app. Despite the U.S.’s general abundance of food, “food deserts” and the financial inability to obtain nutritious food are still a harsh reality for many communities, as Bloomberg BNA has previously discussed. That is one possible reason why several states provide tax credits to farmers that make charitable donations of food to organizations that distribute it to people in need. 

Maryland, New York and West Virginia recently passed legislation creating tax credits for qualified farmers that donate food to food banks. In doing so, these three states have joined a handful of other jurisdictions around the country that offer similar tax credits to eligible farmers, meat packagers and butchers for their charitable donations of food. 

All three of these new credits function in the same manner. Farmers making donations of food to eligible organizations will receive tax credits equaling a portion of the value of their donated goods. 

By and large, these credits follow the same formula in every state that offers them, with a few minor changes specific to each state. South Carolina, with one of the quirkier twists on this credit, allows meat packagers or butchers a credit for making donations of deer meat (S.C. Code Ann. § 12-6-3750) to facilities that distribute food to those in need.

Beyond the newly enacted incentives in these three states, 2017 looks like it is going to be a busy year for these farm-to-food bank credits. California, the District of Columbia and Kentucky will also be seeing changes to their existing tax credits this year. 

D.C. enacted their farm-to-food donation tax credit in 2015, as part of the Urban Farming and Food Security Act. The credit did not last long, however, as it was repealed by legislation effective April 7.

Instead, D.C. replaced the farm-to-food tax credit with a property tax abatement for urban farms. Enacted in the same legislation that repealed the credit this property tax abatement equals 90 percent of the tax on real property being used as an urban farm.  

Kentucky, similar to D.C., will see its credit sunset Dec. 31 if legislation isn’t signed into law to have it extended. So far it doesn’t look as though that has happened. As of May 2, the Kentucky Department of Revenue still lists the credit’s expiration date as the end of this year.

Lastly, there is California. Unlike the previous two jurisdictions, the Golden State will not be seeing its credit disappear in 2017. 

Although the state’s originalcredits for food donations expired Jan. 1,  a new credit for farmers donating food to a food bank was established via 2016 S.B. 837.

Effective for taxable years beginning on or after Jan. 1, 2017, the amount of the new credit is increased from the original 10 percent of the value of donated goods to 15 percent. This new credit is set to expire Dec. 31, 2021.

By incentivizing farmers to make donations of food to nonprofit organizations, such as food banks or homeless shelters, several states seem to be turning to tax credits to address this food access disparity.   

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Should more states establish farm-to-food donation tax credits?

For more information about tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.