[Congressional Record Volume 146, Number 16 (Tuesday, February 22, 2000)]
[Senate]
[Page S688]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LUGAR:
  S. 2084. A bill to amend the Internal Revenue Code of 1986 to 
increase the amount of the charitable deduction allowable for 
contributions of food inventory, and for other purposes; to the 
Committee on Finance.


                  THE HUNGER RELIEF TAX INCENTIVE ACT

  Mr. LUGAR. Mr. President, I rise today to introduce the Hunger Relief 
Tax Incentive Act. The United States is experiencing one of the 
greatest economic expansions in our nation's history. Our country is in 
the enviable position of experiencing both strong growth and record low 
unemployment and inflation.
  Unfortunately, some families have not shared in this rising economic 
tide. Last year, America's Second Harvest food banks, our nation's 
largest hunger relief network, provided food assistance to 26 million 
needy people.
  Food banks and other charities are finding it increasingly difficult 
to meet all of the demand for food assistance. Nearly 1 million needy 
and hungry people were turned away from food banks last year for a lack 
of food, according to Second Harvest. Statistics by the United States 
Department of Agriculture show that up to 96 billion pounds of food 
goes to waste each year in the United States. If a small percentage of 
that food could be captured and directed to food banks, significantly 
more food would be available to those in need.
  In the past, food banks have gained donations from the inefficiencies 
of manufacturing. Producing blemished product or manufacturing too much 
merchandise has provided charities with a steady flow of donations. 
However, technology has made businesses and manufacturers significantly 
more efficient. Although beneficial to the company's bottom-line, 
donations have lessened as a result. Furthermore, the advent of a 
seconds market, including dollar and value stores, has created 
additional demand for these over-produced or cosmetically flawed 
products, placing another strain on this source of food donations.
  As Chairman of the Senate Agriculture Committee, I realize the 
important assistance provided through federal nutrition programs. 
During the debate on welfare reform, I fought for our nation's school 
lunch program, opposing the block granting of such funds in order to 
ensure that low income children received at least one nutritious meal a 
day. I also fought successfully to maintain food stamps as an 
entitlement to ensure access to nutritious food for the nation's poor. 
In 1997, Congressman Lee Hamilton and I sponsored and passed 
legislation that gave charities that serve the poor preferential access 
to surplus federal property. The Hunger Relief Tax Incentive bill I am 
introducing today will complement these efforts and spur private 
donations of food products to food banks and soup kitchens around the 
country.
  Under current tax law, when a corporation donates food to a food 
bank, it is eligible to receive a ``special rule'' tax deduction. 
Congress created the ``special rule'' deduction in the Tax Reform Act 
of 1976 to provide a special incentive for the donation of food to 
charities that serve the poor. The ``special rule'' deduction allows a 
company to deduct the cost (or basis) of the donated product and up to 
\1/2\ the mark-up of the product's fair market value. This deduction is 
capped to not exceed twice the cost basis.
  Unfortunately, when the ``special rule'' deduction is applied to most 
donations, companies have found that they do not even recoup their 
actual production costs. Moreover, current tax law limits the ``special 
rule'' deduction to corporations, thus disallowing farmers, ranchers, 
small businesses and restaurant owners from receiving the same tax 
benefits afforded to corporate donors.
  The Hunger Relief Tax Incentive Act will encourage additional food 
donations with three changes to our current law. First, this bill will 
extend these favorable tax incentives now afforded only to corporate 
donors of food to all business taxpayers. That means farmers, ranchers, 
small business and restaurant owners will benefit through tax 
incentives for their donations of food to hungry people in their own 
community.
  Second, this legislation will enlarge the tax deduction for donated 
food to the fair market value of the product, not to exceed twice the 
product's cost (basis). Although most companies will continue to recoup 
less than the entire cost of production, the enhanced deduction from 
the donation and the resulting heightened good-will makes donating food 
a more economically sound proposition.
  Lastly, this bill will codify the Tax Court ruling in ``Lucky Stores, 
Inc. v. IRS''. In that case, the Court upheld the right of the taxpayer 
to determine the fair market value of donated food, rather than the 
IRS. I agree that taxpayers are in the best position to determine the 
appropriate fair market value of these products.
  Mr. President, the Hunger Relief Tax Incentive Act will help in our 
battle to feed needy Americans and I urge my colleagues to support this 
measure.
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