HF3386

Purpose

• Create a state income tax credit to encourage farmers to donate food to food shelves, supporting charitable food programs.

What the bill does (main provisions)

• Establishes a credit against Minnesota income tax equal to 85 percent of a qualifying donation of food produced by the farmer and donated to a food shelf.
• Values the donation using the monetary-value rules for charitable contributions under Internal Revenue Code section 170.
• Applies a credit limitation: the credit cannot exceed 50 percent of the farmer’s real property taxes paid in the taxable year.
• Denies a double benefit: the donation used to calculate this credit cannot be used for other state income tax deductions or credits.
• Allows a nonrefundable credit carryover: if the credit exceeds tax liability, the excess can be carried forward for up to five succeeding taxable years, applied in earliest years first and limited to the taxpayer’s remaining liability each year.
• Provides for pass-through treatment: credits granted or transferred to partnerships, LLCs taxed as partnerships, S corporations, or multiple owners pass pro rata to the owners based on their share of the entity’s assets (or as specified in governing documents or agreements) as of the last day of the taxable year.
• Allocates credits for nonresidents and part-year residents based on a percentage determined under existing apportionment rules (section 290.06 subdivision 2c paragraph e).

Definitions (key terms)

• Farmer: a taxpayer engaged in farming as defined in federal tax rules and eligible to own farmland under Minnesota law.
• Food shelf: an organization that qualifies as a food shelf under Minnesota law.
• Qualifying donation: an in-kind donation of food produced by the farmer that is eligible for the deduction under Internal Revenue Code section 170.
• Food shelf definition and donor valuation reference: uses rules and definitions tied to charitable contributions under the IRC.

How this interacts with existing law

• The credit is a new mechanism within Minnesota’s tax code (Chapter 290) and is designed to complement, not duplicate, existing tax benefits by tying donation value to federal charitable deduction rules.
• Requires coordination with property tax calculations (limited to 50% of real property taxes) and with pass-through taxation rules for entities with multiple owners.

Implementation considerations and implications

• Encourages food donations by farmers to food shelves through a significant 85% credit, but caps the credit relative to property tax payments.
• Creates several administrative elements: definitions, carryover provisions, and pass-through rules to ensure credits flow to eligible individuals or owners.
• Supports contributions to food shelves defined by Minnesota’s statute, aligning charitable activity with state tax relief.

Significant changes to existing law

• Adds a new refundable structure (actually nonrefundable with carryover) for donations of food by farmers.
• Introduces an 85% credit amount tied to qualifying donations, value determined under IRC 170.
• Establishes credit limitations, carryover rules, and pass-through treatment for entities and owners, plus residency-based allocation rules.

Relevant Terms - credit - donations of food / in-kind charitable donation - food shelf - qualifying donation - 85 percent - Internal Revenue Code section 170 - real property taxes - nonrefundable carryover - five years - double benefit denial - partnerships / LLCs taxed as partnerships / S corporations - pass-through - nonresidents / part-year residents - 290.06 subdivision 2c paragraph e - Minnesota Statutes section 290 - farmer - valuation rules under IRC 170 - food shelf definition (section 124D.1191)