[Congressional Record Volume 147, Number 57 (Tuesday, May 1, 2001)]
[Senate]
[Pages S4118-S4119]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself and Mrs. Lincoln):
  S. 810. A bill to amend the Internal Revenue Code of 1986 to clarify 
the amount of the charitable deduction allowable for contributions of 
food inventory, and for other purposes; to the Committee on Finance.
  Mr. McCONNELL. Mr. President, I rise today to introduce legislation 
to remedy the shortage of food donations that plagues food banks and 
other organizations dedicated to ending hunger in America.
  It is a sad truth that hunger continues to persist even as our 
economy has broken records over the past decade. If we take a look at 
the dynamics of the restaurant industry, new construction, long lines 
for tables, oversized portions of food, it is obvious that food supply 
is not the problem.
  The problem is waste. America wastes 96 billion pounds of food each 
year. And in doing so, we allow 31 million people to go hungry. This is 
unacceptable in a society that has bountiful food resources and an 
infrastructure of local and national food banks willing to accept 
donations of surplus food. Perhaps the most awful statistic is that 
while many of us wait in line to purchase, or to be served, abundant 
amounts of food, many hungry American families will wait in line at 
food banks and never receive a meal. Last year we failed to meet more 
than 20 percent of the demand for food at area food banks. That means, 
in effect, one out of every five families is sent home hungry,
  Why is there such a shortage of donated food? Well, our Internal 
Revenue Service makes it more economical to throw food away rather than 
give it away. While the tax code permits restaurants to deduct half of 
the difference between the cost of donated food and its market value, 
the IRS often will tell a restaurant that donated food has no market 
value for deduction purposes simply because the food was not sold 
through normal retail distribution channels. For instance, a restaurant 
may have its own extra-stringent ``freshness'' standard where they 
proudly sell food that has been ``off the grill'' for less than 10 
minutes. Well, we all know that this same food, if properly maintained, 
will remain wholesome for much longer, and that area food banks have a 
desperate need for such food.
  But when the IRS fails to assign an appropriate market value to 
donated food, the deduction is meaningless. Donating food requires a 
business to incur additional costs of storage, transportation, and 
labor. If a business cannot, at the very least, recoup these additional 
costs, they actually lose money by donating food instead of throwing 
the food away. What we have then, Mr. President, is an IRS that is 
effectively administering tax policy that discourages, rather than 
encourages, private industry from helping to feed needy families. We 
all learned in church that it's better to give than to receive. 
Unfortunately, at the IRS, the motto seems to be: it's better to throw 
away than to give away.
  Another reason that excess food fails to reach needy families is that 
too many businesses are ineligible to deduct food donations because of 
an outdated restriction in the tax code. Many small restaurants, farms, 
and franchises are organized as ``s'' corporations, limited liability 
corporations, or sole proprietorships. The current law, however, limits 
the deduction to traditional ``c'' corporations. If we are serious 
about feeding needy families through charitable donations, then the 
Government needs to enlist a new army of small businesses in the fight 
against hunger.
  To eliminate these two major barriers in the fight against hunger, 
the Feeding Needy Families Act would define the market value of donated 
food without penalizing businesses for setting high internal standards. 
This codifies the decision of the United States Tax Court in Lucky 
Stores, Inc. v. Commissioner, 95 T.C. 420 (1995), where the court held 
that the market value of donated bread was the full retail price for 
purposes of calculating the deduction. The bill also expands the 
deduction to any entity that is kind enough to expend the effort 
necessary to donate surplus food, whether it be an ``s'' corporation, a 
limited liability corporation, or a sole proprietorship. Removing these 
legal, logistical, and financial roadblocks will go a long way to 
ensure that excess food flows from table to table rather than from 
table to trash.
  I am pleased to be joined by Senator Lincoln in introducing this 
important legislation. I ask unanimous consent to include in the 
Record, following the text of my statement, a copy of the bill. I also 
would ask unanimous consent that the Record include letters of support 
from the Salvation Army, USA Harvest, Kentucky Harvest, Northern 
Kentucky Harvest, the National Association of Chain Restaurants, and 
the National Restaurant Association.
  There being no objection, the additional material was ordered to be 
printed in the Record, as follows:

                                 S. 810

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Feeding Needy Families 
     Act''.

     SEC. 2. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Subsection (e) of section 170 of the 
     Internal Revenue Code of 1986 (relating to certain 
     contributions of ordinary income and capital gain property) 
     is amended by adding at the end the following new paragraph:
       ``(7) Special rule for contributions of food inventory.--
       ``(A) Contributions by non-corporate taxpayers.--In the 
     case of a charitable contribution of food, paragraph (3) 
     shall be applied without regard to whether or not the 
     contribution is made by a corporation.
       ``(B) Determination of fair market value.--For purposes of 
     this section, in the case of a charitable contribution of 
     food which is a qualified contribution (within the meaning of 
     paragraph (3), as modified by subparagraph (A) of this 
     paragraph) and which, solely by reason of internal standards 
     of the taxpayer, lack of market, or similar circumstances, 
     cannot or will not be sold, the fair market value of such 
     contribution shall be determined--
       ``(i) without regard to such internal standards, such lack 
     of market, or such circumstances, and
       ``(ii) if applicable, by taking into account the price at 
     which the same or similar food items are sold by the taxpayer 
     at the time of the contribution (or, if not so sold at such 
     time, in the recent past).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2001.

[[Page S4119]]

     
                                  ____
                                                      May 1, 2001.
     Senator Mitch McConnell,
     Washington, DC.
       Dear Senator: I am writing in support of your food donation 
     bill. It has been my experience over the last 14 years that 
     there is truly a need in our nation for the effort that is 
     put forth in this bill. Tragically the average age of 
     homelessness today is 9 years old. Your legislation will 
     certainly go a long way in assisting the 120 USA Harvest 
     chapters in helping feed our nation's less fortunate 
     children.
       The encouragement that this bill will provide those people 
     and organizations in the food business to partner with USA 
     harvest is going to make a significant difference in the 
     quality of life for many millions of Americans.
           Very truly yours,
                                                      Stan Curtis,
      Founder and Chairman USA Harvest.
                                  ____



                                             Kentucky Harvest,

                                    Lexington, KY, April 26, 2001.
     Hon. Mitch McConnell,
     U.S. Senate,
     Washington, DC.
       Dear Senator McConnell: On behalf of our hunger relief 
     program, we write to thank you for your plan to introduce the 
     ``Good Samaritan Tax Act'' in the Senate. By clarifying the 
     charitable deduction allowable for contributions of food and 
     extending the deduction to all business entities willing to 
     donate food, the Good Samaritan Tax Act will help ensure that 
     our program will have access to additional wholesome food. 
     This food will be used to continue our fight against hunger.
       It is a shame for good food to go to waste. However, 
     significant costs are associated with the systematic 
     distribution of food by restaurants to those in need. 
     Distribution and transportation systems, quality control 
     assurances, record keeping and compliance systems must be 
     developed and maintained to safely get food to those who are 
     in need.
       We believe that the Good Samaritan Tax Act will help the 
     food service industry offset these costs, and therefore 
     encourage the contribution of their excess food to 
     organizations such as ours. This additional food will help to 
     ensure our ability to continue to assist those in need.
       Thank you for your support in the fight against hunger.
           Sincerely,
                                                        Ed Schaub,
     Chairman.
                                  ____



                                    Northern Kentucky Harvest,

                                       Covington, KY, May 1, 2001.
     Hon. Mitch McConnell,
     U.S. Senate, Washington, DC.
       Dear Senator McConnell: I am writing on behalf of the bill 
     you plan to introduce named ``The Feeding Needy Families 
     Act.'' By clarifying the charitable deduction allowable for 
     contributions of food and extending the deduction to all 
     business entities willing to donate, the Feeding Needy 
     Families Act will help ensure that our program will have 
     access to additional wholesome food.
       In fact, Northern Kentucky Harvest will benefit greatly by 
     your new bill. In the past, many company-owned restaurants 
     participated in our program where excess food was donated and 
     distributed to feed the homeless and less fortunate in 
     Northern Kentucky. However, when these restaurants were sold 
     to local franchisees, they no longer participated due to the 
     inability to receive ``credit'' for their food donation to 
     defray costs associated with the donation. As a result, many 
     homeless and less fortunate people went without food. This 
     bill gives us another opportunity to reclaim ``wasted'' food 
     and give the less fortunate ``hope'' for another day. Your 
     bill means a great deal to the success of eradicating hunger.
       Please support this bill and allow us to make a difference 
     in our community by trying to overcome hunger.
           Sincerely,
     William E. Henderson III.
                                  ____



                                           The Salvation Army,

                             Louisville, Kentucky, April 19, 2001.
     Hon. Mitch McConnell,
     U.S. Senate, Washington, DC.
       Dear Senator McConnell: On behalf of our hunger relief 
     program, we write today to thank you for your plan to 
     introduce the ``Good Samaritan Tax Act'' in the Senate. By 
     clarifying the charitable deduction allowable for 
     contributions of food and extending the deduction to all 
     business entities willing to donate food, the Good Samaritan 
     Tax Act will help ensure that our program will have access to 
     additional wholesome food. This food will be used to continue 
     our fight against hunger.
       It is a shame for good food to go to waste. However, 
     significant costs are associated with the systematic 
     distribution of food by restaurants to those in need. 
     Distribution and transportation systems, quality control 
     assurances, record keeping and compliance systems must be 
     developed and maintained to safely and efficiently get food 
     to those who are in need.
       We believe that the Good Samaritan Tax Act will help the 
     food service industry offset these costs, and therefore 
     encourage the contribution of their excess food to 
     organizations such as ours. This additional food will help to 
     ensure our ability to continue to assist those in need.
       Thank you for your support in the fight against hunger.
           Sincerely,
                                                    Howard Sparks,
     Director, The Salvation Army Service-unit.
                                  ____

                                               National Council of


                                            Chain Restaurants,

                                      Washington, DC, May 1, 2001.
     Hon. Mitch McConnell,
     U.S. Senate Washington, DC.
       Dear Senator McConnell: On behalf of the National Council 
     of Chain Restaurants, we are writing to express our support 
     for the ``Feeding Needy Families Act''. This bill, which you 
     introduce today, provides tax incentives to encourage 
     business contributions of food items.
       The National Council of Chain Restaurants (``NCCR'') is a 
     national trade association representing forty of the nation's 
     largest multi-unit, multi-state chain restaurant companies. 
     These forty companies own and operate in excess of 50,000 
     restaurant facilities. Additionally, through franchise and 
     licensing agreements, another 70,000 facilities are operated 
     under their trademarks. In the aggregate, NCCR's member 
     companies and their franchisees employ in excess of 2.8 
     million individuals.
       Your legislation is necessary to clarify the charitable 
     deduction allowance for contributions for food, helping 
     ensure the nation's food banks and donation centers can 
     continue the fight against hunger. As welfare reform kicks 
     in, many people making the transition between public 
     assistance and independence are turning to charitable food 
     distribution programs for assistance.
       Unfortunately, the IRS is exacerbating the problem with its 
     interpretation of the charitable donation sections of the 
     Internal Revenue Code. The code is designed to encourage 
     charitable donations of food by allowing a deduction equal to 
     cost plus one-half the difference between cost and fair 
     market value. However, the IRS maintains that when food 
     cannot be sold through normal distribution channels (i.e., 
     food left over when a restaurant closes for the night), its 
     retail value is zero and the taxpayer's deduction is limited 
     to cost only.
       Distribution and transportation systems, quality control 
     assurances, record keeping and compliance systems must be 
     developed and maintained to safely and efficiently get food 
     to the needy. These processes involve significant costs. The 
     ``Good Samaritan Tax Act'' will help the food service 
     industry offset these costs, and therefore encourage the 
     contribution of food to the needy, by codifying the fair 
     market value of donated food. It also extends the deduction 
     to any trade or business, not just corporations.
       We thank you for introducing this common-sense legislation 
     and offer our assistance to ensure its enactment into law.
           Sincerely,
                                                   Terrie M. Dort,
     President.
                                  ____



                              National Restaurant Association,

                                   Washington, DC, April 25, 2001.
     Hon. Mitch McConnell,
     U.S. Senate, Washington, DC.
       Dear Senator McConnell: On behalf of the 844,000 restaurant 
     locations nationwide, the National Restaurant Association 
     offers it's support of the Feeding Needy Families Act, which 
     would provide more equitable tax treatment for food that is 
     donated to charities.
       As you know, under the current tax code, businesses do not 
     receive the same tax deduction for charitable donations of 
     food as they do for other inventory. Food that is not sold 
     through normal distribution channels is considered by the 
     Internal Revenue Service to have no market value. In effect, 
     businesses are penalized and charities suffer because it 
     makes more economic sense for businesses to discard the food 
     than to donate it. The Feeding Needy Families Act would 
     correct this discrepancy in the tax code by allowing 
     businesses to take deductions on a fair market value basis 
     rather than just deducting the cost of raw materials.
       As I am sure you can imagine, the effort and cost involved 
     in preparing perishable items to be donated can be 
     considerable. The food must be carefully collected, packaged, 
     and transported in a timely manner before it can be 
     distributed to food banks, soup kitchens, homeless shelters 
     and other organizations that serve the hungry. Because of the 
     additional work involved, we are concerned that it creates a 
     disincentive for businesses to donate food. That is why the 
     National Restaurant Association supports this legislation as 
     a means of providing strong incentives for businesses to 
     donate food--a much needed and valuable commodity.
       We appreciate your support in moving this issue forward and 
     we hope that you will be successful in enacting the bill 
     without any modifications this year as restaurants are an 
     important resource in helping the millions of Americans that 
     do not get enough food to meet their basic needs.
       Thank you for supporting the Feeding Needy Families Act and 
     we look forward to working with you in passing this 
     legislation.
           Sincerely,
     Steven C. Anderson,
       President and Chief Executive Officer.
     Lee Culpepper,
       Senior Vice President, Government Affairs and Public 
     Policy.
                                 ______