BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 152 HEARING: 7/6/11
AUTHOR: Fuentes FISCAL: Yes
VERSION: 5/27/11 TAX LEVY: No
CONSULTANT: Miller
FOOD BANKS VOLUNTARY CONTRIBUTION FUND
Creates a credit for donations to food banks.
Background and Existing Law
Under current federal and state laws, in general, all
ordinary and necessary expenses of a trade or business are
deductible. For taxpayers, including farmers, that are
required to use an inventory method of accounting, certain
business expenses are capitalized and, upon the sale of the
underlying inventory, are deducted as "costs of goods
sold." Inventories include all goods that are held for
sale in the ordinary course of business or that are to
become a physical part of goods for sale to customers in
the ordinary course of business.
Under current federal law in general, a deduction is
permitted for charitable contributions, subject to certain
limitations that depend on the type of taxpayer, the
property contributed, and the donor organization. The
amount of any deduction generally equals the fair market
value of the contributed property on the date of the
contribution.
Under a federal special temporary provision, for charitable
contributions of food inventory made after December 31,
2009, and before January 1, 2012, a taxpayer engaged in a
trade or business is eligible to claim an enhanced
deduction for donations of food inventory. In general, the
total deduction for donations of food inventory in a
taxable year may not exceed 10 percent of the taxpayer's
net income for such taxable year. The enhanced federal
deduction for food is available only for food that
qualifies as "apparently wholesome food."
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California's Personal Income Tax Law (PITL) generally
conforms to the federal rules relating to charitable
contributions as of the specified date of January 1, 2009,
but does not conform to the enhanced deduction for a
contribution of food inventory. The deduction under the
PITL for charitable contributions of inventory is limited
to the taxpayer's basis in the inventory, generally its
cost. Additionally, the state's Corporation Tax Law (CTL)
does not adopt the general federal rules that allow
enhanced deductions for C-corporation contributions of
inventory, and does not adopt the enhanced deduction for a
contribution of food inventory. The deduction under the
CTL for contributions of inventory is limited to the
taxpayer's basis in the inventory (generally its cost), and
may not exceed ten percent of the corporation's net income.
Any excess may be carried forward for up to five years.
Proposed Law
Assembly Bill 152 provides a tax credit for food donations
to California food banks to sunset on January 1, 2017 are
as follows:
The credit shall be equal to 10% of the cost of fresh
fruits or fresh vegetables donated by a qualified taxpayer
to a California food bank. "Qualified taxpayer" is defined
as the person responsible for planting the crop, managing
the crop, and harvesting the crop from the land.
The cost of donated fresh fruits or fresh vegetables is the
cost of those products that would be included in inventory
costs without regard to the exception for farming
businesses. Generally, inventory costs include both the
direct costs and the allocated indirect costs required to
produce the fresh fruits or fresh vegetables.
The bill requires that the donee organization provide a
certificate to the donor that would include: (1) a
statement signed and dated by an authorized organization
representative that the donation is made under the Food and
Agricultural Code as specified; (2) the type and quantity
of fresh fruits or fresh vegetables donated; (3) the
name(s) of the donor(s); and (4) the name and address of
the donee. A taxpayer reporting the credit would be
required to provide a copy of the certification to the FTB
AB 152 -- 5/27/11 -- Page 3
upon request.
This bill requires that any deduction for the cost of
donated products otherwise allowed would be reduced by the
amount of the credit and any unused credit would be allowed
to be carried forward up to seven years.
The FTB is required to provide a report regarding the
utilization of the credit to the Legislature "to the extent
that data are available." Reports would be due annually by
December 1, with the initial report being due by December
1, 2014. The reporting requirement would become
inoperative on January 1, 2016.
State Revenue Impact
The Franchise Tax Board (FTB) estimates this bill would
result in revenue losses of $200,000 in 2011-12, $200,000
in 2012-13, $400,000 in 2013-14, and $400,000 in 2014-15.
AB 152 -- 5/27/11 -- Page 4
Comments
1. Purpose of the bill . The author states, " Nearly 20
percent of Californians (over 7 million) report that they
are unable to afford the food they need - including many
seniors and working parents whose budgets for food are
squeezed by the economic downturn and slow recovery. At
the same time, low-income Californians find it difficult to
purchase healthy food such as fruits and vegetables because
of both cost constraints and a lack of access in their
community.
Since the beginning of the recession, food banks across
California have seen a sudden and unprecedented increase in
requests for food assistance, beyond anything that has been
seen in a generation. Statewide, most food banks are
reporting a 30-50 percent increase in requests for
assistance. These unprecedented increases combined with
low CalFresh participation and an unpredictable supply of
food lead to the conclusion that food banks are facing an
uncertain future with the possibility that the continual
increase in demand will surpass available food.
The bill allows contributions from the state or federal
government to a state emergency food assistance program for
the purchase of California grown and produced food. Once
funded, this will allow California food banks to purchase
and distribute a greater number of healthy food items like
fruits and vegetables to low-income Californians. The bill
also provides a 10% tax credit to California growers for
the wholesale costs of fresh fruits and vegetables donated
to California food banks. "
2. May I get the recipe ? In these difficult budget times,
many groups are seeking ways to increase funding through
alternative means such as tax check offs and tax credits.
Tax credits are generally used to change or influence
behavior for an intended state-wide impact. While this
credit is limited in scope and fiscal impact, and focuses
only on food donated, the Committee may wish to consider
whether the tax code is the best way to subsidize the food
banks and whether these growers would donate the food
without this tax credit.
3 Triple referral . AB 152 passed the Senate Health
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Committee 7-1 on June 22nd. It will be heard in the Senate
Human Services Committee 7-0 on June 28th and this
Committee on July 6th.
4. Have we met before ? AB 2346 (Kelley, 1989) created a
tax credit for the donation of agricultural products to
certain nonprofit charitable organizations. The credit
this bill would create is substantially similar to the
credit authorized by AB 2346. AB 2346 was repealed by its
own terms effective December 1, 1992. Since 1992, there
have been four additional attempts to reinstate this
credit, all of which have failed.
Assembly Actions
Assembly Health Committee: 19-0
Assembly Revenue and Taxation Committee: 9-0
Assembly Appropriations Committee: 17-0
Assembly Floor: 76-0
Support and Opposition (6/30/11)
Support : Alameda County Community Food Bank ; American
Federation of State, County and Municipal Employees ;
California Association of Food Banks ;
California Catholic Conference ; California Food Policy
Advocates ; California Hunger Action Coalition ; California
State PTA ; Community Action Agency of Butte County, Inc. ;
Community Food Bank ; County Welfare Directors Association
of California ; Emergency Food Bank and Family Services
Stockton/San Joaquin ; Feeding America San Diego ; Food Bank
of Contra Costa and Solano ;
Food for People ; FOOD Share ; Fremont Family Resource
Center ; HMC Farms ; Imperial Valley Food Bank ; Interfaith
Community Services ; Interfaith Food Bank of Amador County ;
Los Angeles Regional Food Bank ; Mariposa Wellness Center ;
Mendocino Food and Nutrition Program ; Meyers Farms Family
Trust ; Ocean Mist Farms ; Ola mo Keriso Church ; Orange
County Food Bank ; Pacific International Marketing ; Podesta
Packing ; Prime Time International ; Quality Packing ; The
Resource Connection ; San Francisco Food Bank ; San Joaquin
Tomato Growers ; Second Harvest Food Bank of Orange County ;
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Second Harvest Food Bank of Santa Clara and San Mateo
Counties ; Second Harvest Food Bank of Santa Cruz ; Shasta
Senior Nutrition Programs/Food Bank ; St. Anthony's of San
Francisco ; Tri-City Volunteers ; Van Groningen and Sons,
Inc. ; Vessey & Company, Inc. ; Western Growers .
Opposition : Unknown.