Budget Amendment ID: FY2022-S3-112

OTH 112

Tax deduction for charitable donations of food by farmers

Mr. Tarr, Ms. Gobi, Messrs. O'Connor and Pacheco moved that the proposed new text be amended by inserting after section _ the following new sections:-

SECTION X. Section 3 of Chapter 62 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by inserting after subparagraph (13), the following subparagraph:

(13A) In the case where the taxpayer is engaged in the trade or business of farming in the commonwealth, as defined in section 1A of chapter 128, and makes a charitable contribution of food from such farm trade or business, a charitable contribution deduction shall be allowed to the taxpayer under subparagraph (13); notwithstanding, the deductibility limitation based on the prior year’s tax rate on Part B taxable income under said subparagraph. Subject to the provisions of this subparagraph, the requirements, conditions and limitations, for charitable deductions for contributions of food inventory under section 170(e) of the Code, as amended, shall apply to determine the amount of the allowed deduction.

For the limited purpose of determining the amount of the allowable deduction for any charitable contribution of food, the taxpayer may elect an alternate cost basis for such contributed food, equal to 25 per cent of the food’s fair market value, regardless of whether the taxpayer is required to account for inventories or capitalize indirect costs under the Code.

A food contribution shall not qualify for an allowable deduction under this subparagraph, unless in addition to such other requirements: (i) the contributed food complies with the applicable quality and labelling standards of “apparently wholesome food” as defined under 42 U.S.C. 1791(b)(2), of the Bill Emerson Good Samaritan Food Donation Act, in effect when this subparagraph was enacted; and, (ii) the donee that accepts the contributed food from the taxpayer, is a charitable organization located in the commonwealth that is exempt from federal taxes under section 501(3)(c) of the Code, other than a private foundation, and that regularly receives and distributes contributed food of any type, for the care of individuals who are ill, needy, or infants in Massachusetts.

SECTION XX. Chapter 63 of the General Laws is hereby amended by inserting after section 38FF, the following section:

Section 38GG.    In determining the net income subject to tax under this chapter a corporation for profit engaged in the trade or business of farming in the commonwealth, as defined in section 1A of chapter 128, shall be allowed a deduction for charitable contributions of food by the corporation to a charitable organization. The term “charitable organization” for the purposes of this section, shall mean an organization exempt from federal taxes under section 501(3)(c) of the Code, excluding private foundations, that is located in the commonwealth and regularly receives and distributes contributed food in any form, for the care of individuals who are ill, needy, or infants in Massachusetts.

Subject to the provisions of this section, the requirements, conditions and limitations, applicable to charitable deductions for contributions of food inventory under section 170  of the Code, shall apply to determine the amount of the allowed deduction.

For the limited purpose of determining the amount of the allowable deduction for any charitable contribution of food, the corporation may elect an alternate cost basis for such contributed food, equal to 25 per cent of the food’s fair market value, regardless of whether the corporation is required to account for inventories or capitalize indirect costs under the Code.

A food contribution shall not qualify for an allowable deduction under this section, unless, in addition to such other requirements, the contributed food complies with the applicable quality and labelling standards of “apparently wholesome food” as defined under 42 U.S.C. 1791(b)(2), of the Bill Emerson Good Samaritan Food Donation Act, in effect when this section was enacted.

The allowed deduction under this section shall be in addition to other deductions allowable for corporations for profit under this chapter.

SECTION XXX.  Sections X and XX shall be effective for tax years beginning on or after, January 1, 2021.