(b) CLERICAL AMENDMENT.—The table of sections 
for subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 36 the following 
new item: 
(c) 
CONFORMING
AMENDMENT.—Section 
6211(b)(4)(A) of the Internal Revenue Code of 1986 is 
amended by inserting ‘‘, 36A’’ after ‘‘36’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2020. 
SEC. 7. ESTABLISHMENT OF TEMPORARY TAX CREDIT FOR 
UNMERCHANTABLE INVENTORY. 
(a) IN GENERAL.—For purposes of section 38 of the 
Internal Revenue Code of 1986, in the case of an eligible 
taxpayer, the unmerchantable inventory credit shall be 
treated as a credit listed at the end of subsection (b) of 
such section. For purposes of this subsection, the 
unmerchantable inventory credit for any taxable year be-
ginning after December 31, 2019, and ending before April 
1, 2021, shall be equal to 90 percent of the qualified 
unmerchantable inventory costs incurred by the eligible 
taxpayer during such taxable year. 
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(b) ELIGIBLE TAXPAYER.—For purposes of this sec-
tion, the term ‘‘eligible taxpayer’’ means any taxpayer 
which— 
(1) on March 13, 2020, was engaged in an ac-
tive trade or business of selling food or beverage in-
ventory as a manufacturer, importer, wholesale dis-
tributor, or retailer, and 
(2) with respect to such trade or business— 
(A) on or after March 13, 2020, held 
qualified unmerchantable inventory, or 
(B) incurred costs described in subsection 
(c)(1)(A)(i). 
(c) 
QUALIFIED
UNMERCHANTABLE
INVENTORY 
COSTS.— 
(1) IN GENERAL.—For purposes of this section, 
the qualified unmerchantable inventory costs in-
curred by an eligible taxpayer during any taxable 
year shall be equal to— 
(A) an amount equal to the sum of— 
(i) any costs described in section 
263A(a)(2) of the Internal Revenue Code 
of 1986 with respect to the purchase or ac-
quisition of any qualified unmerchantable 
inventory during such taxable year, 
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(ii) any costs relating to disposal or 
destruction of any qualified unmerchant-
able inventory during such taxable year, 
and 
(iii) any amount paid or credited by 
such eligible taxpayer during such taxable 
year to any other person for purposes of 
apportioning or sharing costs relating to 
products which, in the hands of such eligi-
ble taxpayer, would be deemed to be quali-
fied unmerchantable inventory, minus 
(B) an amount equal to the sum of— 
(i) any amount received by such eligi-
ble taxpayer during such taxable year from 
any other person for purposes of appor-
tioning or sharing costs with respect to 
qualified unmerchantable inventory, 
(ii) any amounts compensated by in-
surance for any loss sustained by such eli-
gible taxpayer during such taxable year 
with respect to qualified unmerchantable 
inventory, and 
(iii) any amounts received under the 
Coronavirus Food Assistance Program 
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under part 9 of title 7, Code of Federal 
Regulations (or successor regulations). 
(2) DIRECT COSTS FOR MANUFACTURERS.—In 
the case of a manufacturer, the costs described in 
paragraph (1)(A)(i) shall include any transportation 
costs which would not otherwise have been capital-
ized pursuant to section 263A of the Internal Rev-
enue Code of 1986. 
(d) QUALIFIED UNMERCHANTABLE INVENTORY.— 
(1) IN GENERAL.—For purposes of this section, 
the term ‘‘qualified unmerchantable inventory’’ 
means any food or beverage inventory which— 
(A) was manufactured or acquired by the 
eligible taxpayer, and 
(B) became unmerchantable during the pe-
riod beginning on March 13, 2020, and ending 
on September 30, 2020. 
(2) UNMERCHANTABLE.—For purposes of this 
subsection, the term ‘‘unmerchantable’’ shall include 
any food or beverage products which cannot be sold 
due to— 
(A) spoilage, 
(B) expiration pursuant to the manufac-
turer code date or applicable industry freshness 
standards, or 
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(C) a change or limitation in market condi-
tions resulting in the lack of a customary and 
reasonable market for such products. 
(e) ELECTION TO HAVE CREDIT NOT APPLY.— 
(1) IN
GENERAL.—A taxpayer may elect to 
have this section not apply for any taxable year. 
(2) TIME FOR MAKING ELECTION.—An election 
under paragraph (1) for any taxable year may be 
made (or revoked) at any time before the expiration 
of the 3-year period beginning on the last date pre-
scribed by law for filing the return for such taxable 
year (determined without regard to extensions). 
(3) MANNER OF MAKING ELECTION.—An elec-
tion under paragraph (1) (or revocation thereof) 
shall be made in such manner as the Secretary of 
the Treasury, or the Secretary’s delegate, may by 
regulations prescribe. 
(f) DENIAL OF DOUBLE BENEFIT.—No deduction 
shall be allowed under any provision of chapter 1 of the 
Internal Revenue Code of 1986 with respect to any 
amount taken into account in determining the credit al-
lowed to a taxpayer under this section. 
Æ 
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