The American Taxpayer Relief Act of 2012 (ATRA) retroactively extended the enhanced deduction for qualifying charitable contributions of food inventory made by taxpayers [IRC Section 170(e)(3)(C)].
In the case of donated Food inventory, the deduction typically is limited to the taxpayer’s basis in the property. However, under Section 170(e)(3)(C), charitable contributions of food inventory that are used to care for the ill, the needy, or infants may result in an enhanced deduction (subject to the 10% taxable income limitation). The enhanced deduction is equal to the taxpayer’s basis in the contributed inventory, plus half of the profit that would have been recognized if the inventory had been sold at its fair market value on the date of contribution, not to exceed two times the taxpayer’s basis in the contributed inventory.
On August 1, 2013 U.S. Rep. Sander Levin (D-MI) and Rep. Jim Gerlach (PA-06) introduced Bill H.R.2945 to amend the Internal Revenue Code of 1986 to permanently extend and expand the charitable deduction for contributions of food inventory. Among other things this bill will increase the 10% taxable income limitation to 15% and extend the deduction to some C-corps.