Farm donations to food pantries credit: FAQs
Beginning January 1, 2018, New York State farmers may claim a new refundable tax credit for qualified food donations made to a food pantry, food bank, or other emergency food program. The credit is equal to 25 percent of the fair market value of qualified donations, with a maximum benefit of $5,000 per year. Please refer to the following FAQs to see if you qualify for this tax benefit.
Q: Who is eligible for the credit?
A: The credit is available to farmers whose income is primarily attributed to farming activity in the State and are subject to the corporate franchise tax or personal income tax. A farmer who is a partner in a partnership or a shareholder of a New York S corporation may also qualify.
Q: What is a qualifying food donation?
A: Eligible donations include fresh fruits, vegetables, eggs, and meat products grown or produced in New York State. Donations of apparently wholesome food that meets all quality and labeling standards, even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions, will qualify.
Q: Who is eligible to receive food donations?
A: To qualify for the credit, eligible food donations must be made to food banks, food pantries, or other emergency food programs operating in New York State that qualify for tax exempt status under IRC § 501(c)(3).
Q: How much is the credit worth?
A: The tax credit is a refundable credit equal to 25% of the fair market value of qualified donations. Taxpayers are limited to maximum credit of $5,000 per year.
Example: An eligible farmer makes qualified donations during tax year 2018 that have a fair market value of $12,000. The eligible farmer would be allowed a credit of $3,000 calculated as follows:
$12,000 (fair market value of qualified donations) X 25% = $3,000.
The fair market value of qualified donations is generally the market price of the donated crop, determined in accordance with current federal standards. The fair market value using these standards is determined:
- without regard to internal standards, lack of market or similar circumstances, or by reason of being produced by the taxpayer exclusively for the purposes of transferring the food to an eligible food pantry; and
- by taking into account the price at which the same or substantially the same food items (as to both type and quality) are sold by the taxpayer at the time of the contribution or in the recent past.
Q: What is needed to claim the credit?
A: In order to claim the credit, the taxpayer must receive and keep a receipt (letter or other written communication) from the eligible food pantry showing the following:
- the name of the eligible food pantry,
- the EIN of the eligible food pantry,
- the date and location of the qualified donation, and
- a reasonably detailed description of the qualified donation.
Q: When does the tax credit program start?
A: The credit is effective for taxable years beginning on or after January 1, 2018. Donations made during the tax year may be claimed on the return for that tax year.
Example: A qualified donation is made on February 1, 2018. The farmer will claim a credit against that donation when he files his 2018 tax return.
Donations made prior to January 1, 2018 will not be eligible for the credit.
Q: Can a farm deliver donations through a third party, such as a not-for-profit food aggregator or an agricultural cooperative?
A: Donations made to a food pantry through a third-party IRC § 501(c)(3) entity may qualify for the credit so long as the third-party nonprofit can provide the eligible farmer with a reasonable accounting of the donation and a receipt from the food pantry.
Food donated by a third-party for which the eligible farmer has already received compensation will not qualify.
Q: Can farmers donating dairy products receive the tax credit?
A: If a dairy farm processes, bottles and delivers its own milk, this will qualify as an eligible donation as long as the farmer making the donation meets the definition of an eligible farmer.