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Tax credits for donated food

The pandemic has stretched our ability to supply food banks and provide food aid. New approaches must be found

Four provinces have specific farm donation laws, says lawyer Mary Childs. But even in other provinces, farmers may qualify for tax credits.

Even at the best of times, some Canadians can’t afford to buy enough healthy, nutritious food. This year’s pandemic raised the risk that more households would fall into that group. Within just a few weeks of the lockdown, demand at food banks began to rise when millions of Canadians were furloughed or lost their jobs altogether. Food banks across the country reported up to 50 per cent increases in demand, especially in large urban centres.

That’s not likely a temporary blip. Food bank officials say they expect ongoing pressure as the country’s economy slowly recovers over the weeks and months ahead.

“During the 2008 economic crisis, food bank use increased by 28 per cent during that time and never came back down to pre-recession levels,” says a spokesperson for Food Banks Canada.

“Given the depth of economic disruption this time, we can expect the increase of food banks use over the coming months to climb at least 30 per cent, but likely higher.”

Where will the food come from to meet this need? The root of the problem is poverty and the solutions will come, eventually, in new income support programs for Canadians.

Near press time we were awaiting an announcement on details for a $50 million federal COVID-19 response program aimed at buying surplus food from farmers for distributing in communities in need.

Meanwhile, food banks have long pitched ideas for transitioning away from short-term charitable responses to domestic food aid based on alternate models for procuring surplus food.

As early as 2016, Food Banks Canada was calling for an agricultural federal tax credit, the idea being to provide a small opportunity for food producers to recoup some of their production costs as they contribute food for redistribution through food banks.

The idea garnered support from the Canadian Federation of Agriculture and from the National Zero Waste Council for its potential to divert and redistribute surplus quality food from landfills.

There are also models already in place. Four jurisdictions in Canada have provincial tax credits for farmer donations.

Ontario was first to introduce the scheme in 2013 when the provincial government amended its “Local Food Act.” The Ontario law now enables farmers there to claim 25 per cent of the fair market value of food donated to eligible food programs. British Columbia and Nova Scotia soon passed similar laws. Quebec introduced an even more generous credit of 50 per cent value of the donation.

Mary Childs. photo: Supplied

“Fair market value means what the farmer could get for that product in a retail market such as a grocery store,” explains Mary Childs, Vancouver-based lawyer with expertise in food donation law, previously with Miller Thomson LLP, now general counsel at Tsawwassen First Nation.

“For amounts under $1,000, fair market value can be approximated on a case-by-case basis by a food bank staffer with sufficient knowledge. The Canada Revenue Agency also has guidelines for determining this value.”

Childs does point out that donating is still a great option elsewhere in Canada, and farmers in other provinces should be aware they may still be able to obtain some tax benefits from these donations.

“In-kind donations to charities may entitle them to charitable donation tax credits under the rules that apply to all donations to registered charities,” Childs says. Donors should check local regulations because the rules can differ slightly province to province.

Food Banks Canada has called the approach a way to strengthen the agricultural sector and assure nutritious food for the people they help.

Those donations are substantial too. Food Banks Canada doesn’t have exact data from their network across the country, but notes that donations like the 1.8 million eggs from Egg Farmers of Canada in 2019 — with pledges to double that support during COVID-19 — tell the tale.

Other commodity groups are also very strong.

“Food banks across the country already have many great relationships with farmers and food producers in their communities and are very grateful for their generosity,” the spokesperson said.

Generosity is the key word, however. Farmers donate food primarily as an act of philanthropy, say those who have researched the impact of tax credits for addressing food insecurity as well as food loss and waste.

A study completed recently in Ontario, however, looked at donations of fresh produce from farmers and found a gap between what the tax credits were expected to achieve and the actual outcome.

Farmers donating fresh produce to Ontario food banks told the the researchers that they hadn’t been influenced by the tax credit to make their donations, said Lesia Kinach, a University of Guelph MA in its department of geography and environment, and lead author of Do food donation tax credits for farmers address food loss/waste and food insecurity? recently published in Agriculture and Human Values.

Instead, their primary motivation was to support the community and avoid seeing good food go to waste, Kinach said.

“Many farmers were already donating before the tax credit. It wasn’t a huge factor in their decision to donate,” she said.

That study, which looked specifically at fresh produce donations from farmers in southern Ontario, also identifies another issue: food banks don’t always have the storage capacity to handle increased volumes of donated food. Introduction of tax credits alone won’t address that challenge.

Kinach said their study concludes there’s need — one that is intensifying as 2020 advances — for a rethink of Canada’s donation-dependent food bank system, including finding ways to help farmers support it.

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About the author

Associate editor

Lorraine Stevenson

Lorraine Stevenson is associate editor with Country Guide. She has also covered agriculture and rural issues since 1995 as a reporter with the Manitoba Co-operator and Farmers’ Independent Weekly.

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