Overview
Title
To amend the Internal Revenue Code of 1986 to provide tax incentives for the establishment of grocery stores in certain underserved areas.
ELI5 AI
The "Fresh Food Act" wants to help build grocery stores where people can't find fresh food, by giving them big savings on taxes to make it easier to pay for workers and fresh items like fruits and meats.
Summary AI
S. 5120, also called the “Fresh Food Act,” proposes changes to the Internal Revenue Code to offer tax incentives aimed at encouraging the establishment of grocery stores in underserved areas. The bill introduces tax credits for businesses that operate new grocery stores in areas lacking access to fresh foods, providing financial benefits for employing staff and selling fresh produce, meats, and dairy. The proposed incentives include a work opportunity tax credit and a credit for the cost of goods sold, with an added bonus for locally sourced fresh products. These provisions aim to improve access to fresh food in these communities while promoting economic opportunities.
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AnalysisAI
General Summary of the Bill
The bill, known as the "Fresh Food Act," seeks to modify the Internal Revenue Code of 1986 by introducing tax incentives aimed at encouraging the establishment of grocery stores in areas that are underserved and lack access to fresh, nutritious foods. Specifically, the bill proposes tax credits for grocery stores that operate in these areas, with additional incentives for those that employ local individuals and sell locally sourced, fresh fruits, vegetables, meat, and dairy products.
The bill details how these incentives would work, including increasing the work opportunity tax credit for employees of these new stores and providing a credit for the retail sales of fresh food. Additionally, the bill outlines criteria for determining what qualifies as an "underserved area" and the requirements a grocery store must meet to be eligible for these tax benefits. These measures are designed to reduce food deserts and improve access to healthy food options in both rural and metropolitan areas where they currently lack presence.
Summary of Significant Issues
One significant concern with the bill is the definition of "underserved areas." The strict criteria could exclude areas that still need improved access to grocery stores, potentially limiting the bill's effectiveness in addressing food deserts. By focusing on specific numerical thresholds for poverty and median income, some needy areas may be unintentionally left out.
Another issue is the exclusion of canned or frozen foods from qualifying for tax credits. This could restrict access to affordable nutrition, as these food forms are often less costly and have a longer shelf life than fresh options. This restriction might inadvertently undermine the goal of improving access to healthy food, especially in regions where fresh produce is less available.
The complex structure of tax incentives and the phased-out reduction of credit percentages could deter smaller grocery stores from participating due to the financial planning challenges it poses. Additionally, the 5% bonus for locally sourced products may favor businesses in agriculturally productive states, resulting in regional disparities in benefit reception.
The requirements for a "new underserved area grocery store" seem to favor larger establishments due to the minimum building size stipulation, potentially deterring innovative smaller businesses or alternative grocery models from participating. Finally, the decision to set a termination date for these incentives could deter long-term planning and investments from businesses seeking to enter the market outside the specified timeframe.
Impact on the Public and Stakeholders
Broadly, the bill aims to provide healthier food options by incentivizing grocery businesses to open in underserved areas, which could lead to better public health outcomes in communities suffering from poor access to nutritious food. The increased availability of fresh produce and other perishable items can contribute positively to dietary changes and overall health improvements for residents in these areas.
For specific stakeholders, such as grocery store owners and investors, the incentives offer financial benefits that could encourage the opening of new locations. However, smaller stores may find it challenging to qualify due to size restrictions or find managing the complexity of the phased credit system difficult. Additionally, the requirement to sell a set percentage of sales from fresh foods might discourage those who wish to offer diverse grocery options, which could include non-fresh staples that are still nutritious and cost-effective.
Communities in agricultural regions might see more immediate benefits due to the local sourcing bonus; meanwhile, those in less productive areas might struggle to compete on equal terms for these additional credits. As such, the bill may not distribute its benefits evenly across all intended communities.
In conclusion, while the Fresh Food Act has the potential to positively impact access to healthy foods in underserved areas, the specific definitions, requirements, and restrictions included in the legislation may limit its effectiveness and equity. The bill might need additional refinement to fully realize its goals and ensure broader, fairer participation among varied stakeholders and communities.
Financial Assessment
The "Fresh Food Act," designated as S. 5120, introduces financial incentives intended to encourage the establishment of grocery stores in underserved areas. These incentives are primarily in the form of tax credits, which are a key focus of the legislation.
Tax Incentives and Financial Allocations
A significant component of the bill is the Increased Work Opportunity Tax Credit. This part of the act proposes that for any individual employed in the trade or business of operating a new underserved area grocery store, the tax credit available would increase by $1,000. This provision aims to alleviate some of the financial burden associated with hiring employees by offering direct tax benefits to store operators. However, this incentive could potentially exclude smaller businesses that may not have the resources to effectively utilize these credits, thereby possibly encouraging larger stores to participate.
Additionally, the legislation offers a Credit for Sales of Fresh Fruits, Vegetables, Meat, and Dairy. This credit is calculated as a percentage of the cost of goods sold by the business, with the percentage decreasing over subsequent years of operation. Initially, the credit is set at 30% but decreases to 0% over a predefined period. This phased reduction presents a potential planning challenge for businesses. Smaller grocery stores, which may have more limited financial resources, could find the gradual diminution in credits challenging, potentially impacting their long-term financial planning and stability.
Concerns and Implications
The definition of items eligible for these tax credits excludes canned or frozen foods from the term "fresh fruits, vegetables, meat, and dairy." This exclusion could inadvertently limit the range of affordable, nutritious food options available to underserved communities that might rely on more affordable canned or frozen food products. While the intention is to incentivize the sale of fresh products, it could undermine the delivery of essential nutrients to areas that rely heavily on preserved foods for their longevity and cost-effectiveness.
Moreover, the legislation includes a 5 percentage point bonus for grocery stores that sell locally sourced products. This additional incentive could unintentionally favor businesses located in agriculturally rich states, creating a regional bias that does not account for the geographic and agricultural diversity across the country. Grocers in urban or less agriculturally productive areas might find it challenging to meet these sourcing requirements, potentially leaving them at a disadvantage when trying to access these financial benefits.
Lastly, the termination timeline for these incentives, set between December 31, 2024, and January 1, 2031, suggests a finite period during which these benefits can be claimed. This deadline might discourage investment in areas where establishing new grocery stores could take longer or where businesses must secure other forms of financing to complement these tax incentives. The limited window could thus hinder the bill's long-term effectiveness in addressing food deserts comprehensively.
Overall, the financial allocations within the Fresh Food Act are structured to encourage economic activity in underserved areas. However, the execution of these provisions requires careful consideration to ensure that the intended benefits reach all types of grocery stores, particularly smaller and emerging businesses, without inadvertently exacerbating existing inequalities.
Issues
The criteria for determining 'underserved areas' in Section 1400B are potentially restrictive and may exclude communities that need grocery stores but do not meet strict numerical thresholds, leading to a risk of not addressing food deserts effectively.
The exclusion of canned or frozen foods from the definition of 'fresh fruits, vegetables, meat, and dairy' in Section 1400B may limit the availability of affordable, nutritious food in underserved areas, potentially undermining the bill's intent to improve food accessibility.
The complexity of tax incentives provided in Section 2 and the phased reduction of applicable credit percentages in Section 1400A may create challenges for businesses in financial planning and compliance, possibly discouraging smaller grocery stores from participating.
The provision in Section 1400A for a 5 percentage point bonus for locally sourced products may unintentionally favor grocery stores in agricultural states over those in less agriculturally productive areas, leading to perceived regional bias.
The definition and requirements for a 'new underserved area grocery store' in Section 1400B, such as the 80,000 square foot size, may disproportionately benefit larger stores over smaller or more innovative business models, raising concerns of economic inequity.
The lack of clear definitions for terms like 'metropolitan area,' 'population census tract,' and 'equivalent county divisions' in Section 1400B may create confusion and inconsistencies in policy implementation.
The bill's termination date in Section 1400A and associated credit timeline may restrict longer-term investments or stable business operations, particularly as businesses might not qualify if developments occur outside the eligibility window.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
In Section 1, the text states that this law can be called the "Fresh Food Act."
2. Tax incentives for establishment of grocery stores in certain underserved areas Read Opens in new tab
Summary AI
This section of the bill introduces tax incentives for grocery stores set up in underserved areas. It allows increased tax credits for employing individuals in these grocery stores and for the sale of fresh food items like fruits, vegetables, meat, and dairy, with additional bonuses when the products are locally sourced.
Money References
- “(a) In general.—In the case of an individual employed in the trade or business of operating a new underserved area grocery store (as certified by the designated local agency (as defined in section 51(d)(12)), the limitation otherwise in effect under section 51(b)(3) with respect to such individual shall be increased by $1,000.
1400. Increased work opportunity tax credit Read Opens in new tab
Summary AI
The section outlines an increase in the work opportunity tax credit by $1,000 for individuals employed at new underserved area grocery stores, as certified by a local agency. It also allows for alternative certification methods and specifies that this benefit applies to wages paid between January 1, 2025, and December 31, 2030.
Money References
- (a) In general.—In the case of an individual employed in the trade or business of operating a new underserved area grocery store (as certified by the designated local agency (as defined in section 51(d)(12)), the limitation otherwise in effect under section 51(b)(3) with respect to such individual shall be increased by $1,000.
1400A. Credit for sales of fresh fruits, vegetables, meat, and dairy Read Opens in new tab
Summary AI
The section provides a tax credit for grocery stores in underserved areas that sell fresh fruits, vegetables, meat, and dairy, with the credit calculated as a percentage of the cost of these goods sold. The percentage starts at 30% and decreases over time, with a 5% bonus if the products are sourced locally, and applies to years between 2025 and 2030.
1400B. Definitions Read Opens in new tab
Summary AI
This section of the bill defines "fresh fruits, vegetables, meat, and dairy" as agricultural products suitable for eating, excluding canned or frozen items. It also describes what qualifies as a "new underserved area grocery store," detailing criteria like size, sales, and location in underserved or rural areas, and outlines how underserved areas are determined, emphasizing coordination with the Secretary of Agriculture.