BILL ANALYSIS Ó
AJR 19
Page 1
ASSEMBLY THIRD READING
AJR 19 (Hall)
As Amended August 21, 2012
Majority vote
REVENUE & TAXATION 5-0
-----------------------------------------------------------------
|Ayes:|Fuentes, Beall, Gordon, | | |
| |Nestande, Perea | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Urges the United States (U.S.) Congress to permanently
extend and expand the federal charitable tax deduction for
contributions of food inventory by non-corporate taxpayers.
Specifically, this bill :
1)States all of the following:
a) The most recent food insecurity data released by the
U.S. Department of Agriculture in 2011 shows that nearly 49
million people are at risk of hunger today, while billions
of pounds of food are wasted each year;
b) Since 1976, the U.S. Congress has permitted a federal
food donation tax deduction to corporate taxpayers that
donate food products to charities in need across the
country;
c) The tax deduction, which encouraged the donations of
excess food to charity, was temporarily expanded to
taxpayers that were non-C corporations, such as small
businesses and farmers in 2005, with two-year extensions
granted in 2006, 2008, and 2010;
d) The enhanced deduction that was available to non-C
corporations expired at the end of 2011 and is currently up
for permanent reauthorization in HR 3729 and S 166; and,
e) Permanent reauthorization of the deduction is needed to
maximize the potential donation opportunity.
2)Resolves that:
AJR 19
Page 2
a) The Legislature respectfully urges the U.S. Congress to
enact HR 3729 or S 166 to permanently extend and expand the
federal charitable tax deduction for contributions of food
inventory; and,
b) The Chief Clerk of the Assembly transmit copies of this
resolution to each Senator and Representative from
California in the U.S. Congress.
EXISTING FEDERAL LAW :
1)Allows a tax deduction for charitable contributions, subject
to certain limitations such as the type of taxpayer, the
property contributed, and the donee organization. The amount
of any deduction generally equals the fair market value of the
contributed property on the date of the contribution.
2)Allows an enhanced tax deduction for charitable contributions
of food inventory by "C" corporations, as specified.
3)Limits the application of the enhanced deduction to food that
qualifies as "apparently wholesome food," i.e., food intended
for human consumption that meets all quality and labeling
standards imposed by federal, state, and local laws and
regulations, as provided.
EXISTING STATE LAW :
1)Allows a deduction for ordinary and necessary expenses of a
trade or business.
2)Conforms generally, as of January 1, 2009, to the federal
rules relating to charitable contributions, but specifically
does not conform to the enhanced deduction for a contribution
of food inventory.
3)Provides a tax credit, for taxable years beginning on or after
January 1, 2012, and before January 1, 2017, to California
growers for the costs of fresh fruits or vegetables donated to
California food banks. The tax credit amount equals to 10% of
the costs that would otherwise be included in inventory costs,
as specified, with respect to the donation of fresh fruits or
fresh vegetables to food banks located in California.
AJR 19
Page 3
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
The author's statement . The author states that, "Since 2006,
the demand for food assistance at food banks across the country
has increased by 46 percent. According to 2011 data by the
United States Department of Agriculture, approximately 49
million Americans are at risk of hunger. In Los Angeles County
alone, 17% of residents or over 1.7 million people struggle with
food insecurity. Due to the continued economic crisis, more
families are expected to become dependent upon food banks and
other food assistance programs to provide for themselves and
their families.
"Since 1986, the federal government has provided organizations a
food donation tax deduction to encourage donations to food banks
and other hunger relief programs. This deduction expired in
2011. Last year, the US House of Representatives introduced HR
3729 to make the tax deduction permanent in order to incentivize
continued food donations to needy families.
"Failure to approve HR 3729 law this year could put millions of
Americans at risk of hunger and food insecurity at a time when
demand for food assistance is reaching all-time highs.
"Assembly Joint Resolution No. 19 calls on Congress to extend
the Charitable Food Donation Deduction and pass the proposed
House Bill HR 3729 to make the tax deduction permanent.
"Extending the Charitable Food Donation Deduction would give
organizations an important incentive to donate surplus food to
the needy."
Federal tax deduction for charitable contributions of food
inventory: Background . Under federal law, a tax deduction is
allowed to taxpayers for charitable contributions, subject to
certain limitations that depend on the type of taxpayer, the
property contributed, and the donee organization. The amount of
the deduction equals the fair market value of the contributed
property on the date of the contribution.
AJR 19
Page 4
A "C" corporation may claim a charitable contribution deduction
but the amount of the deduction is generally limited to 10% of
the corporation's taxable income for the year. In the case of a
charitable contribution of inventory by a "C" corporation, the
deduction amount is further limited; it is required to be
reduced by one-half of the amount that would have been ordinary
income had the property been sold at its fair market value of
the date of the contribution. However, a special tax benefit in
the form of an enhanced tax deduction is provided to a "C"
corporation when it contributes food inventory to a charitable
organization. The enhanced deduction amount is equal to the
corporation's basis in the inventory (generally its cost) plus
one-half of the donated food's appreciated value, with the
limitation that the total deduction may not exceed twice the
donated food's original cost. The enhanced deduction is
available only for food that qualifies as "apparently wholesome
food" and was contributed to a qualified charity or private
operating foundation for use in the care of the ill, the needy
or infants. "Apparently wholesome food" is defined as food
intended for human consumption that meets all quality and
labeling standards imposed by federal, state, and local laws and
regulations, even if the food was not readily marketable due to
appearance, age, freshness, grade, size, surplus, or other
conditions.
Non-corporate taxpayers (taxpayers other than "C" corporations)
were temporarily eligible for this enhanced deduction for
contributions of food inventory made on or after August 28,
2005, and before December 31, 2011. The deduction amount was
limited to 10% of the taxpayer's aggregate net income for that
tax year, but this limitation was suspended for donations made
by qualified farmers and ranchers after October 3, 2008, and
before January 1, 2009.
Charitable contributions and California law . California
conforms to the federal rules related to charitable
contributions as of the specified date of January 1, 2009, but
it specifically does not conform to the enhanced deduction for a
contribution of food inventory. Thus, the deduction amount
under the Personal Income Tax Law is limited to the taxpayer's
basis in the inventory (generally, the taxpayer's costs). The
deduction for contributions of inventory for "C" corporations
(under the Corporation Tax Law) is limited to the taxpayer's
basis in the inventory and may not exceed 10% of the
AJR 19
Page 5
corporation's net income. However, any excess may be carried
forward for up to five years.
A permanent federal extension and expansion of the charitable
deduction for contributions of food inventory (HR 3729 and S
166) . HR 3729, among other things, would: a) make permanent
the enhanced tax deduction for charitable contributions of food
inventory by non-corporate taxpayers; b) codify the definition
of fair market value as the price at the time of the
contribution, without regard to internal standards or lack of
market; and, c) increase the amount of deductible food inventory
contributions that a taxpayer, including a C corporation, may
make in any taxable year from 10% to 15% of taxpayer net income.
S 166 is similar to HR 3729.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0005265