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Maryland’s Farm Food Donation Tax Credit: A Solution to Food Waste or a Limited Incentive?
At the state level, a recent study suggests that current policies can only achieve an average 5 percent reduction in food waste relative to their respective generation levels. It also found an overemphasis on recycling strategies rather than prioritizing prevention, rescue, and repurposing food for livestock feed. With many states’ food waste policies leaning heavily on recycling-focused strategies, Maryland’s moderate policy environment, which includes tax credits for donating farm food, offers an example to assess whether tax incentives, as one of the three main rescue solutions, can effectively strengthen food waste reduction.
Why Farm Food Donation Matters
More than half of the surplus food generated at the farm level is edible surplus rather than spoiled food. The 2025 ReFED U.S. Food Waste Report indicates that nearly one-fourth of the surplus food comes from farms among the five main sectors. However, the safe and nutritious surplus food is often left unharvested or unsold due to market conditions, labor shortages, or cosmetic standards. Donation helps recover surplus food at the farm level, which can thus prevent the unnecessary use of land, water, and other resources that would otherwise be lost when food goes to waste. Besides, farm-level food donation is one of the most recommended rescue strategies in food loss and waste (FLW) management, as it ensures that food and resources used to produce it are used for their intended purpose to feed and nourish people rather than go to waste. As depicted below, EPA’s Wasted Food Scale places donation as the second preferred strategy to reduce food waste, right below preventing wasted food and above feeding animals, composting, anaerobic digestion, and disposal.
Figure 1, Credit: Environmental Protection Agency
What is Maryland’s Farm Food Donation Tax Credit?
Under Maryland Tax-General §10-745, Maryland offers an income tax credit to encourage farm-level donation of eligible food products to food banks and food pantries certified by the Maryland Department of Agriculture (MDA). Farmers may receive a Maryland income tax credit of up to $5,000 per year based on the value of their donated food, which MDA determines using the U.S. Department of Agriculture’s wholesale price listings.
The tax credit is available to any farm businesses located in Maryland that makes an eligible food donation. An “eligible food donation” is a donation of fresh farm products for human consumption given to qualifying organizations that distribute food to people in need without requiring monetary value from the recipient. Maryland sets the tax credit value at 100 percent of the wholesale value of eligible food donations, up to a maximum of $5,000 per taxable year.
Qualified farms that donate “apparently wholesome food” in good faith to a nonprofit organization for ultimate distribution to needy individuals are protected from liability under the Bill Emerson Good Samaritan Food Donation Act. As long as the donor has not acted with gross negligence or intentional misconduct, the donor is not liable for damage incurred as the result of illness.
How the Tax Credit is Intended to Reduce Food Waste
Maryland’s Farm Food Donation Tax Credit is designed to reduce the donor’s state income tax owed directly to offset the financial costs of donating surplus food, such as transportation, labor, packing, and storage, which are often more expensive compared to disposal or leaving crops unharvested. Theoretically, lowering the marginal costs of farm food donation increases the likelihood that farms choose donation over other food waste management options, such as disposal.
However, the effectiveness of the tax credit depends on the following behavioral assumptions:
- Farmers respond to financial incentives when choosing among various surplus food management options, such as donation, selling at a loss, composting, or disposal,
- Reducing the net cost of donation changes donor behavior at the point where farms decide whether surplus is worth harvesting and moving into a donation pathway rather than being left in fields or disposed of,
- And the tax incentive can only translate into real donations if there is a certain logistical capacity, including access to food recovery organizations, transportation, and storage, so that farms can operationalize the donation even if they want to.
Why Do Proponents Support the Food Donation Tax Credit?
First, Maryland’s farm food tax credit provides direct reductions to the amount of taxes owed to offset the cost barriers associated with food donation. Because the costs of transportation and logistics are often cited as the main expenses faced by donors, the tax credit helps overcome these cost barriers and incentivizes qualified farms to donate surplus food. More importantly, a tax credit is a direct subtraction from taxes owed, while a tax deduction only lowers taxable income and therefore results in a smaller, more uncertain benefit depending on the donor’s taxable income level and tax bracket. In other words, a tax credit operates as a clearer “payoff” for farm food donation decisions by directly making part of the donation costs recoverable through reduced state income tax liability. Therefore, a tax credit can be more effective than a tax deduction for food producers that operate with a low profit margin, like many farms.
Second, Maryland’s Farm Food Donation Tax Credit provides a flexible and voluntary incentive that encourages participation without imposing the compliance and enforcement burdens that often come with regulatory mandates. Under Maryland Tax-General §10-745, eligible farms may choose to claim a credit when they donate qualified farm products. There is no requirement that farms must divert surplus food, meet diversion quotas, or face penalties for noncompliance. The tax credit preserves farms’ flexibility while still nudging behavior, especially in contexts where farms face highly variable harvest conditions and market volatility. This voluntary structure can reduce political resistance and administrative burden relative to enforcement-related regulatory mandates.
Third, Maryland’s farm food donation tax credit complements donor liability protections by actively incentivizing donation behavior that legal risk protections alone would not otherwise resolve. Federal law helps reduce perceived legal risk for good-faith donations, but liability protection does not solve practical barriers like transport costs and coordination constraints. A state tax credit, therefore, can act as the “other half” of the policy tool that liability protection lowers legal risk, while the credit lowers financial costs, making farm food donation more likely to happen.
Why Do Opponents Critique the Food Donation Tax Credit?
First, the eligibility constraints of the tax credit may disproportionately benefit larger farms and underserve the producers most constrained by food waste challenges. Maryland’s Farm Food Donation Tax Credit has an administrative process, including certified recipient organizations by the MDA and valuation based on USDA wholesale price listings, which may be easier for farms already connected to established food recovery partners, and farms with greater administrative capacity and consistent surplus are more likely to take advantage of the tax credit, while smaller farms with limited labor and time may find it harder to participate.
Second, the tax credit motivates participation only after other barriers have been solved. In other words, legal safety and operational feasibility come first. Donation decisions typically occur only after donors believe they are legally protected and can meet food safety or handling expectations. A tax credit cannot compensate for uncertainty about compliance or quality standards. According to food bank leadership interviews, perishable handling capacity, especially refrigeration and cold-chain transportation are the practical constraint for distributing recovered produce. Therefore, if transportation and logistics are the binding constraint, a tax credit as the incentive alone may not create more farm food donations where recovery organizations lack sufficient capacity to pick up, store, and distribute farm products.
Third, the tax credit’s marginal impact may be limited because it can function more as a benefit for existing farm donors than a trigger for new participation. A case study suggests that the donation decisions made by many producers with a certain capacity are driven by factors other than the tax credit itself, indicating that the incentive’s added effect on farm food donation outcomes may not be as effective as intended. As a result, the tax credit may be taken up primarily by farms that already have established donation relationships and administrative capacity to document donations and claim the benefit, rather than by the farms faced with more participation barriers.
Conclusion
In Maryland, the effectiveness of Maryland’s Farm Food Donation Tax Credit is conditional. Whether it meaningfully diverts farm-level surplus away from disposal depends on three main conditions:
- farm administrative capacity and consistent surplus,
- the existence of farm donor liability protections,
- and the availability of operational and logistical support.
The tax credit can be effective in increasing farm donations and reducing food waste for farms that have surplus, consistent recovery partners, and sufficient logistic capacity. However, when the main barriers are more on the operational side, the tax credit may have a limited marginal effect on reducing food waste and may benefit farms already close to donating. Therefore, the question is not simply whether the tax credit can be effective as a whole, but for whom and under what circumstances it encourages farm-level donation and reduces food waste.
Yilin Zhou is a recent public policy graduate from Georgetown University’s McCourt School of Public Policy.
Maryland’s Farm Food Donation Tax Credit: A Solution to Food Waste or a Limited Incentive? was first published by ACE and was republished with permission.
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