Farmers markets and farm-to-table dining are great ways to enjoy fresh and healthy food straight from the farm. Thanks to farm-to-food bank tax credits in some states, farmers can bring healthy necessities to the hungry and receive a tax boost while doing so. States’ various farm-to-food bank tax credits are intended to help cover the expenses of harvesting, processing, and transporting excess produce. While the credit enables farmers do their part and donate, it also helps keep food banks and pantries stocked with fresh food, which is a welcome addition to the usual donated canned and packaged food.
Following the passage of the Farm-to-Food Bank Tax Credit under S.B. 25 last year, effective Jan. 1, 2018, West Virginia recently adopted regulations, which came into effect later this year on March 23, 2018. The new legislation allows farmers a tax credit to be applied against either the personal income tax or corporate net income tax. Under the newly adopted regulations, farmers may donate any food item deemed “edible agricultural product,” which include: fruits and vegetables; meats, including fish; grains; and dairy products. Growers must also donate to a “qualifying nonprofit food program,” which are recognized 501(c)(3) surplus food collection and distribution programs operated throughout West Virginia to redistribute food to those in poverty. The amount of the credit is equal to 10 percent of the value of the donated food products, but it cannot exceed $2,500 or the taxpayer’s total tax liability, whichever is lesser.
From Jan. 1, 2018, New York state farmers may claim a tax credit for donations to an eligible pantry under New York’s Farm to Food Bank Tax Credit. The credit can be claimed by eligible farmers whose income is primarily attributed to in-state farming activity and can be used to offset either the corporate franchise tax or personal income tax. Qualifying food donations include fresh fruits, vegetables, eggs, and meat products. Farmers can even donate food that may not be marketable due to imperfections, age, size, or other conditions, so long as the food meets quality and labeling standards. The credit is equal to 25 percent of the fair market value of donations and capped at a maximum benefit of $5,000 per year.
Unlike West Virginia, New York’s credit is refundable, allowing a refund for the difference if the credit is larger than the tax that’s due. So for example, if Farmer Fred donates $10,000 worth of peaches during tax year 2018, the allowable credit would be $2,500, calculated as follows: $10,000 (fair market value of qualified donations) x 25 percent = $2,500.
Since 2015, Colorado has supported the state’s agriculture and Coloradans impacted by hunger. H.B. 14-1119, also known as the Colorado Charitable Crop Donation Act, offers a 25 percent tax credit on the wholesale value of food donated to qualified nonprofit food distribution banks in-state. For example, if donated produce had a wholesale value of $10,000 and retail value of $13,500, the tax credit amount would be $2,500. In doing so, the credit helps bring access to fresh and local produce (which includes, fruits, vegetables, dairy, and meat products) for Coloradans in poverty.
Not only does the credit help Colorado’s food banks and low-income families by stocking shelves with basic necessities, it’s also easier for Colorado growers to invest in the financial and labor resources required to procure donations. H.B. 14-1119 guidelines further require donations to certified food banks and impose a cap of $5,000 per producer.
States’ farm-to-food bank tax credits appear to be a smart investment. Food pantries are better able to provide meals to people in need who are too often provided food that doesn’t include fresh fruits and vegetables, dairy, and meat. Also, farmers can more easily do their part in helping feed the hungry, minimize food that would otherwise go to waste, and receive tax incentives for their efforts.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should your state provide farm-to-food bank tax credits to incentivize donations to food banks?
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