SALINAS, CA – On Tuesday, November 24 Congressman Jimmy Panetta (D-Carmel Valley) and Congressman Adrian Smith (R-Nebraska) introduced the bipartisan Preserving Charitable Incentives Act to temporarily eliminate tax incentives to destroy property rather than donate goods to charity during the COVID-19 pandemic. The legislation increases the cap for charitable tax deductions to incentivize companies to donate goods such as clothing, shoes, and diapers. Currently, charitable tax deductions are limited to 25% of a business’s taxable income, while other deductions, such as destroyed property, do not face this limitation. Representatives Panetta and Smith’s legislation will raise this cap to 100%, ending the tax incentive to destroy property, instead of donating it, through 2021.
Their legislation also directs the Department of the Treasury to improve regulations to enable restaurants to donate more food to charity. Currently, restaurants that prepare food to be donated receive an enhanced deduction to cover the cost of preparation. Current regulations treat both costs and the enhanced deduction as a charitable contribution, which is subject to the taxable income limitation. As a result, restaurants that hit their charitable income limitations are then likely to dispose of excess food, rather than donate it. This provision allows the costs of preparation to be treated as a normal deduction, not subject to this cap.
“Our tax code should encourage donations, not the destruction of goods or food, especially at a time when so many are in need,” said Congressman Panetta. “The Preserving Charitable Incentives Act will ensure that retailers and restaurants don’t face an extra tax burden when they choose to donate their inventory and prepared food. Our legislation will help keep our food banks and charities stocked so they can continue to serve our communities during these challenging times.”
“In an already-difficult year where more Americans than ever need help, our tax code shouldn’t incentivize destroying inventory over donating it. Our nation’s businesses have gone above and beyond to safely serve their communities this year, and this commonsense adjustment would remove one further barrier to helping others,” said Congressman Smith.
“During these unprecedented times now, more than ever, families who rely on the food bank to get by often need more than just nutritious food. The Preserving Charitable Incentives Act would encourage our generous retail donors to also donate other essential necessities like diapers, wipes, feminine products, warm clothes, socks and shoes. When putting food on the table is already a struggle, people are forced to forgo many of these critical items that others take for granted,” said Melissa Kendrick, Executive Director, Food Bank for Monterey County.
"We are in the middle of a hunger crisis and food banks are on the frontlines serving our communities and meeting this unprecedented need for emergency food. Now, more than ever food banks need support and any way we can incentive food donations to California's food banks is a win for California, for food banks, and for the people they serve," said Andrew Cheyne, director of government affairs for the California Association of Food Banks. "We thank Congressman Panetta for bringing forth this legislation and for his continued anti-hunger leadership. Yet again, he stands with food banks and the rapidly growing number of food insecure Californians."
“On behalf of the California Retailers Association, we want to thank Congressman Panetta for his work to develop legislation that would fix an anomaly in the federal tax law that provides a retailer with a more favorable tax position if they destroy inventory that they are unable to sell than if they donate that inventory to charity. During this pandemic, this legislation is a win-win for Californians and all Americans. Those who are in economic distress can benefit from donations of inventory that our retailers are unable to sell because of the decline in the marketplace, and retailers that are strapped for cash because of that decline in sales can get the same write off if they donate the inventory as they would if they discarded it and took a loss,” said Rachel Michelin, President and CEO of the California Retailers Association.
“This bill would put some common sense into the tax code. Right now, retailers actually have a tax incentive to throw out unsold inventory, rather than donate it. That means a person who’s out of work because of the pandemic may have to do without even though retailers have merchandise that’s going to waste. There are people who are in need now more than ever, and the tax code shouldn’t stand in the way of retailers that are under their own financial constraints doing the right thing. Whether it goes to the ill, the needy or infants and children, retailers would rather see last season’s clothing on the backs of someone who can use it than in a dumpster. The same goes for restaurants with food that could feed the hungry rather being thrown out,” said David French, Senior Vice President for Government of the National Retail Foundation.
“The National Council of Nonprofits supports charitable giving incentives that encourage donations of inventory to our nation’s nonprofits for their use in advancing their missions. During this pandemic, frontline nonprofits have seen an increase in demand for services while experiencing decreasing charitable giving and funding, frustrating nonprofits’ abilities to meet those needs. This legislation will promote corporate donations of useful products at a time when they are needed most. It deserves swift approval by Congress,” said Tiffany Gourley Carter, Policy Counsel for the National Council of Nonprofits.
“For over 28 years, Food Donation Connection (FDC) has coordinated the distribution of surplus food from the food service industry to non-profits helping people in need. Tax law is designed to encourage donors by providing a financial incentive that offsets some of the costs associated with donating food. We support Congressman Panetta’s effort to improve the current law with ‘The Preserving Charitable Incentives Act’. We believe that passage of this act will result in an increase in food donations to the less fortunate during this difficult time of COVID-19,” said Jim Larson, Vice President of Development, Food Donation Connection.
“Restaurants persevering through the COVID-19 pandemic are eager to continue feeding front line healthcare workers, first responders, and families in need. We appreciate Congressman Panetta’s leadership to help local restaurants and those in need during this crisis,” said Sean Kennedy, Executive Vice President of Public Affairs, National Restaurant Association.
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