‘Good Samaritan’ act eases ability to donate healthy, uneaten food
When state governors shut down the economy at the beginning of the coronavirus pandemic, many restaurant brands donated food to people in need. Restaurateurs also turned to preparing meals for hunger-relief programs, along with take-out orders, to keep employees working and their kitchens open.
And many continue to donate food or prepared meals to hunger relief organizations to help feed our food-insecure neighbors across the country — a growing concern as so many people remain jobless.
While you may know that all or a portion of donated food or meals is likely a tax-deductible charitable contribution, you may not know that as long as you follow your local jurisdiction’s food code safety procedures, it’s also protected from liability.
In both cases, however, there are rules to follow.
Getting an enhanced tax deduction
The Internal Revenue Service provides an incentive to help feed those in need. The tax code allows all restaurants and other foodservice operations such as caterers, food trucks, contract management feeders and even schools—whether they’re C-corporations, S-corporations, limited liability corporations, partnerships, or sole proprietorships—to deduct food contributions to qualified charitable organizations that distribute food or serve meals to the hungry. But you can deduct more than just the base cost of the food you donate, which is considered a general deduction.
The rules to get an enhanced tax deduction, which usually qualify for a larger dollar savings for your business, are detailed in many sources, including the Federal Enhanced Tax Deduction for Food and the Natural Resources Defense Council.
Essentially, you can deduct the lesser of two calculations:
- Two times the basis value of the food you donate (its actual raw cost to you or the cost of preparing that food into a ready-to-donate meal, which would include labor, utilities, etc.);
- The basis value of the food you donate plus half of the “profit” (which is the difference between the basis value and the fair market value you would have sold the item for).
Example: The basis value for a large pan of lasagna is $30 (your cost to produce it). The fair market value, what you would have sold it for, is $100. The difference is $70.
- In scenario one, two times the basis value is $60
- In scenario two, $30 (the basis value) plus half of $70 (the difference between the fair value and the basis), is $65.
The lesser of these is $60; that’s your enhanced deductible amount.
Note too that some states have their own tax incentives; see p. 14 of this report for examples.
Universally, however, you cannot deduct food or meals you donate directly to individuals coming to your restaurant. Donation recipients must be official, documented nonprofit charitable organizations.
Law greatly limits liability
The other benefit you get from donating food and meals to nonprofit organizations is liability protection provided by the Bill Emerson Good Samaritan Food Donation Act. All 50 states have food donation statutes that limit food donors’ liability, but these vary widely in who and what’s covered.
The 1996 Good Samaritan law provides uniform limited liability protection for those who make good-faith donations to nonprofits that feed the hungry. Like the IRS Code, the act specifies that donations must be made to a qualified charity.
The statute provides liability protection if you comply with applicable state and local health, food handling, and food safety laws and regulations.
Therefore, for a restaurant to get liability protection, employees must take the following steps:
- The food must be donated to a nonprofit organization in good faith.
- The donated items must be apparently wholesome food.
- The food must be distributed by the nonprofit to needy individuals and they are not permitted to pay for it.
- The food must meet all federal, state, and local quality and labeling requirements; if labeling requirements are not met, the food must be reconditioned to meet them before donation.
For example, you can’t knowingly donate food you wouldn’t use or serve in your own operation, such as:
- Foods past their “use by” dates
- Foods in open or torn packages
- Foods from dented or bloated cans that you’d normally reject from a supplier upon delivery
Many established nonprofit feeding programs welcome wholesome prepared meals from your restaurant kitchens that they can serve to those in need, especially during the COVID-19 crisis.
Most hunger-relief organizations across the country will accept whole, unprocessed, or minimally processed foods as well.
Finally, good foods to donate to food banks are shelf-stable or nonperishable canned foods such as tuna and chicken, and dry goods such as pasta, rice, and peanut butter.
For more information on the Bill Emerson Good Samaritan Food Donation Act, read the USDA’s FAQ sheet.