Community food program donation tax credit for farmers

Overview

An eligible person that donates agricultural products to eligible community food programs in Ontario may be able to claim the non-refundable Community food program donation tax credit. This credit is in addition to the Charitable donation tax credit.

The credit is worth 25% of the fair market value of the agricultural products donated.

Eligibility

A qualifying donation is a donation made after 2013 by an eligible person of one or more agricultural products produced in Ontario to an eligible community food program in Ontario.

An eligible person means either:

• an individual (or his or her spouse or common-law partner) who carries on the business of farming in Ontario and resides in Ontario on December 31 of the tax year
• a corporation that carries on the business of farming in Ontario

A trust is not entitled to claim this credit.

An agricultural product means:

• meat or meat by-products, eggs or dairy products, fish, fruits, vegetables, grains, pulses, herbs, honey, maple syrup, mushrooms, nuts, or anything else that is grown, raised or harvested on a farm, and that may legally be sold, distributed or offered for sale at a place other than the premises of its producer as food or drink intended for human consumption
• any of the items listed above that was processed, if it was processed only enough for the product to be able to be legally sold, distributed or offered for sale at a place other than the premises of its producer as food or drink intended for human consumption
• live mammals or birds raised in captivity (excluding hunted game animals) suitable for and intended to be processed as food

Examples of processed products that are not eligible include pies, sausages, beef jerky, pickles, and preserves.

For more information about agricultural products, contact the Ministry of Agriculture, Food and Rural Affairs. [link to https://www.ontario.ca/page/ministry-agriculture-food-and-rural-affairs ]

An eligible community food program is a person or entity:

• that is engaged in the distribution of food to the public without charge in Ontario, including as a food bank
• that is registered as a charity under the Income Tax Act (Canada)

The Canada Revenue Agency has a list of Canadian registered charities

To qualify as an eligible community food program, the person or entity must also satisfy at least one of the following conditions:

• the primary purpose for which it distributes food to the public without charge in Ontario is to provide relief to the poor or to people who are lacking essential amenities available to the general public
• it operates, or oversees the administration of, one or more student nutrition programs that provide meals or snacks to students enrolled in an elementary or secondary school or supervised alternative learning program

Receipts

There is no need for the eligible community food program to issue a different receipt to the donor for the donor to claim this credit.

The receipt issued for charitable donations of goods may also be used for this credit if the donation qualifies and the receipt:

• includes a sufficiently detailed description of the goods donated
• farmers and tax administrators can determine whether all or some of the goods donated are agricultural products eligible for this credit

To issue a receipt for a charitable donation, a charity must be able to identify the actual donor or donors. If a group donation is made without detailed donor information, the charity may not be able to issue separate receipts to each donor in the group.

A registered charity is required to maintain adequate books and records, including copies of official donation receipts.

Determining the value of donated products

Eligible community food programs should use the fair market value of the items donated. The fair market value is usually the highest dollar value you can get for those items in an open and unrestricted wholesale or retail market, as applicable, between a willing buyer and a willing seller who are acting independently of each other. The value should be based on the quantity and quality of the items and will have to be determined in each case.

The Canada Revenue Agency provides general guidelines on determining fair market value.

Generally, if the fair market value of the item is less than $1,000, a member of the registered charity or another individual, with sufficient knowledge of the donated item, may determine its value.

The person who determines the fair market value of the item should be competent and qualified to evaluate the particular item being donated.

For donations of live mammals or birds raised in captivity, their value is as live animals suitable and intended to be processed as food, not the value of the meat from them. When calculating the credit that you claim, you can include the value of the live animals that you donated if this is the value that is shown on the receipt for the donation.

Resources to assist with determining fair market value

The following links may assist community food programs with determining fair market value for some agricultural products.

Please note that these links are only meant to guide assessment. If a community food program needs to verify the value of a donated item, it may wish to seek the assistance of knowledgeable parties unrelated to the donor or the charity, such as other farmers, retail stores or wholesalers.

Statistics Canada provides average retail prices of selected produce on a monthly basis. 

Produce included in the Statistics Canada information are:

• meat (round steak, sirloin steak, prime rib roast, blade roast, stewing beef, pork chops, chicken, bacon)
• dairy and eggs (homogenized milk, partly skimmed milk, butter, eggs)
• fruits (apples)
• vegetables (carrots, celery, mushrooms, onions, potatoes)

The Ontario Ministry of Agriculture, Food and Rural Affairs provides the average wholesale prices of fruits and vegetables on a yearly basis. Since these are wholesale prices, the fair market value price may be higher if the quantity of goods donated would normally be exchanged in a retail (rather than wholesale) transaction.

Produce included in the Ontario Ministry of Agriculture, Food and Rural Affairs information are:

• fruits (apples, apricots, blueberries, watermelons, melons, cherries, grapes, nectarines, peaches, pears, plums and prunes, raspberries, strawberries)
• vegetables (asparagus, beans, beets, broccoli, brussel sprouts, cabbage, carrots, cauliflower, celery, corn, sweet cucumbers, garlic, leeks, lettuce, mushrooms, onions, parsley, parsnips, peas, green peppers, pumpkins, squash and zucchini, radishes, rhubarb, rutabagas, spinach, tomatoes)

The Canada Revenue Agency provides general guidelines on determining fair market value.

Calculating the credit

For individuals, the credit is 25% of the value of your qualifying donations. You must also claim the qualifying donations under the charitable donations tax credit in the same year.

For corporations, the credit is 25% of the value of the qualifying donations that the corporation claimed on its Schedule 2, Charitable Donations and Gifts for the year.

Claiming the credit

If you are an individual :

Claim the credit by filing a completed Form ON428, Ontario Tax, with your personal income tax and benefit return (T1 return).

To claim the credit when you make a qualifying donation as part of a group, you must have been given a receipt from the eligible community food program showing your portion of the goods that were donated by the group. You need to keep all your receipts in case you are asked to see them.

Get your General Income Tax and Benefit package from the Canada Revenue Agency

If you are a corporation:

Claim the credit by filing a completed Schedule 2, Charitable Donations and Gifts, with your Corporation Income Tax Return (T2 return).

Receipts do not have to be attached to your Corporate Income Tax Return. Keep all official receipts in case you are asked for them later during an audit.

Get your Corporation Income Tax return package from the Canada Revenue Agency