On November 6, 2013, the Ontario government passed Bill 36, otherwise known as the Local Food Act, 2013. Among other initiatives, this bill includes an amendment to provide a tax credit to Ontario farmers who donate certain agricultural products.
History
According to the Ontario Association of Food Banks (OAFB), the number of people relying on local food programs has significantly increased from 2008. In 2012, the number of users reached an all-time high of 412,998 per month. While donations typically include pre-packaged food or canned goods, these items are not as nutritious as fresh produce, vegetables and other foods essential to a healthy diet. To encourage these types of donations, the OAFB has been lobbying the Ontario government over the last few years to offer a tax incentive for farmers to donate their products.
The passing of this new tax credit is definitely a breakthrough, with Ontario being the first province within Canada to pass such a bill. In the United States, over 10 states have already passed similar incentives for local farmers.
Tax Credit
To qualify for the tax credit, the donation must meet the following criteria:
- the donation is of one or more agricultural products produced and donated by an eligible person to an eligible community food program in Ontario; and
- the donation is made on or after January 1, 2014.
Eligible Person
To be eligible for the tax credit, the taxpayer must either be:
- an individual or a spouse who carries on the business of farming in Ontario; or
- a corporation that conducts the business of farming in Ontario.
While this would clearly include individuals and farm corporations whose primary income is derived from farming, it is unclear at this time if this will also include food processors and hobby farms.
Eligible Community Food Program
To be considered a qualified community food program, an individual or entity must:
- be engaged in the distribution of food to the public without charge in Ontario, including food banks;
- be registered as a charity under the federal act; and
- satisfy the other conditions prescribed by the regulation.
Examples of qualified community food programs include the Gleaners and the OAFB.
Qualifying Products
Eligible agricultural products include produce, fruit and vegetables. It is unknown at this time if the definition of agricultural products will also include dairy foods and poultry, although these items would definitely benefit both farmers and food banks.
Calculation of Credit
The credit will be based on the wholesale market value of the products at the time of the donation, multiplied by a factor of 25 percent. This amount can then be deducted from the donors Ontario tax liability, provided the donation meets the above conditions.
Note that the Community Food Program Donation credit is a non-refundable tax credit, meaning a refund cannot be triggered on the amount over and above the taxpayer’s Ontario tax liability. However, like other charitable donations, the unused portion of the credit can be carried forward and claimed in any of the following five taxation years.
Conclusion
The implementation of this tax credit is a win-win situation for both Ontario farmers and food banks. It will provide some cost recovery to those farmers who already donate and an additional incentive for more farmers to give surplus or discounted products to food banks.
For additional information and planning opportunities, contact your individual Collins Barrow advisor.