Sponsor: Tom Reed (9 cosponsors, all Republicans). In his press release, Tom wrote:
“In their time of need, families often turn to local food banks and pantries to put food on the table. It’s only right and fair that we help local food banks care for our neighbors. By making this tax provision permanent, we will increase food donations and see that more families have access to the food they need. We are happy to promote legislation that brings together businesses and charitable groups to care for those in need in our community.”
Republicans often demand that bills be revenue neutral, but evidently not in this case. Tom sometimes opposes making temporary provisions permanent, but not when the issue is a tax break for business. Reed continues:
Congress temporarily expanded the provision in 2006 and according to the Food Donation Connection, donations have increased 127 percent since the 2006 expanded tax deduction. That temporary expansion expired at the end of 2013. Without Reed’s bill, it is cheaper in most cases for these types of businesses to throw their food away than it is to donate the food. The Fighting Hunger Incentive Act would make the tax provision permanent, allowing more businesses and farmers to take advantage of making food donations.
Reed’s statement implies that increased donations are due to the 2006 expanded tax deduction; that this is the reason is uncertain.
Here is the CBO summary of HR 4719:
H.R. 4719 would amend the Internal Revenue Code to permanently extend and expand certain expired provisions that provided an enhanced tax deduction for businesses that donated their food inventory to charitable organizations. The enhanced deduction for food inventory contributions expired after December 31, 2013, and applied to sole proprietors, partnerships, and other businesses not organized as C corporations (which are already permanently allowed an enhanced deduction under more general provisions of current law). H.R. 4719 would also expand the maximum deduction for all businesses by allowing deductions of food inventory donations up to 15 percent of the net income of the donating organization, an increase from the 10 percent allowed permanently under current law for C corporations and allowed previously for other businesses. In addition, the bill would allow certain businesses to make alternative assumptions about the cost basis and fair market value of donated food inventory.
The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 4719 would reduce revenues, thus increasing federal budget deficits, by about $1.9 billion over the 2014-2024 period.
A similar bill was introduced in 2011. It died in committee due to Republican opposition to it. Prior to voting on H.R.4719, Democratic Whip Steny Hoyer wrote:
Budget Committee Chairman Paul Ryan has said that, “The people deserve a government that works for them, not one that buries them in more debt.” Unfortunately, bringing permanent, unpaid-for tax cuts to the Floor does exactly the opposite. The White House agrees and has issued a SAP stating that the President would veto this bill. If House Republicans are serious about fiscal responsibility, they should work with Democrats to make the tough decisions necessary to address our broken tax code through comprehensive tax reform, which would address these and other tax extenders in a way that does not add to deficits and does not limit our ability to invest in domestic discretionary priorities.
The Obama Administration opposes H.R.4719 and threatens a veto:
the Administration strongly opposes House passage of H.R. 4719, which would permanently extend three current provisions that offer enhanced tax breaks for certain donations and add another two similar provisions without offsetting the cost. If this same, unprecedented approach of making certain traditional tax extenders permanent without offsets were followed for the other traditional tax extenders, it would add $500 billion or more to deficits over the next ten years, wiping out most of the deficit reduction achieved through the American Taxpayer Relief Act of 2013. Just two months ago, House Republicans themselves passed a budget resolution that required offsetting any tax extenders that were made permanent with other revenue measures.
As with other similar proposals, Republicans are imposing a double standard by adding to the deficit to continue and create tax breaks that primarily benefit higher-income individuals, while insisting on offsetting the proposed extension of emergency unemployment benefits and the discretionary funding increases for defense and non-defense priorities such as research and development in the Bipartisan Budget Act of 2013. House Republicans also are making clear their priorities by rushing to make these tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 26 million working families and students
by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire.
HR 4719 passed 277-130; 129 Democrats and 1 Republican, Jones (R-NC), voted NO. Rep. Jones is a fiscal conservative; doubtless he objected to the loss of revenue. Why other Republicans didn’t share Rep. Jones’ concern is obscure–perhaps they anticipate that the Senate will ignore it or amend it, or that President Obama will veto it giving them a talking point.
According to the Partnership for Philanthropic Planning, a 501(c)(3) nonprofit organization:
it is unlikely the Senate will consider H.R. 4719 as currently drafted. Instead, the Senate is expected to address the issue of tax “extenders” (i.e., provisions like the IRA Charitable Rollover that expired at the end of 2013) either in the fall or perhaps after the mid-term elections in November. The Senate will likely put forward a two-year retroactive extension of the Rollover, bringing the provision back for all of 2014 and 2015, rather than a permanent extension as provided for in the House-passed bill.
Thus Tom’s bill may be at a dead end in spite of the fanfare.
© William Hungerford – July 2014