No goods or services were provided by us in exchange for this charitable donation. A number of expenses are incurred when a restaurant donates its excess food. Based on our experience, provided below is an example of the typical cost associated with food donation programs. Note that costs will vary from company to company based on type and value of food donated, the type of storage containers needed, storage method and other factors. This example assumes the value of the donated food to be two times cost.
Costs represent a percentage of tax savings.
Two tax rates are used in this example. Obviously, if we are to encourage food service companies to donate rather than discard usable surplus food, we need to allow them to offset the costs of doing so. Section 170 of the IRS Code allows a deduction equal to the donated food basis cost plus of the appreciated value, not to exceed twice the basis cost. This last limitation, as well as strict receipting requirements, insures that a company cannot earn a profit by producing food specifically for donation. The company still loses money on the donated food.