REDUCE Food Prices Act

Bill Number

H.R. 701

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-01-23: Referred to the House Committee on Ways and Means.

Last Updated

2026-03-09T16:56:08Z

AI-Generated Summary

Purpose

The "Restoring Establishment Deductions and Uplifting Competition to Ease Food Prices Act" (REDUCE Food Prices Act) aims to encourage the growth of small food retail businesses in areas with limited competition in the food retail sector. By offering targeted tax incentives, the bill seeks to increase competition, improve access to affordable food, and potentially lower food prices in underserved communities.

Key Provisions

• Definition of Qualified Small Food Retail Business: A business qualifies if it meets these criteria:
• It is a small business with assets not exceeding $200 million (based on existing tax rules for small businesses).
• At least 70% of its average annual gross receipts come from selling food or produce at retail.
• It operates in a "low-competition area," defined as a county where the Herfindahl-Hirschman Index (HHI)—a standard economic measure of market concentration calculated by the U.S. Department of Agriculture's Economic Research Service—is 1,400 or higher (indicating high concentration and low competition among food retailers).

• Increased Rehabilitation Tax Credit (Section 2): For qualified small food retail businesses rehabilitating old buildings for use, the tax credit for qualified rehabilitation expenses rises from 20% to 25% of costs. Applies to buildings placed in service after enactment.

• Increased Work Opportunity Tax Credit (Section 3): For wages paid to certain employees (e.g., those from disadvantaged groups), the credit limits increase for these businesses:
• From $6,000 to $8,000 for the first $6,000 of wages.
• From $12,000 to $14,000 for the first $12,000.
• From $14,000 to $16,000 for the first $14,000.
• From $24,000 to $26,000 for the first $24,000.

Applies to taxable years beginning after enactment.

• Increased Bonus Depreciation (Section 4): Allows faster tax write-offs for new property, equipment, or plants (e.g., fruit or nut-bearing plants). For these businesses, depreciation percentages increase:
• 70% (instead of 60%) for property placed in service in certain years.
• 50% (instead of 40%) in others.
• 30% (instead of 20%) in later years.

Applies to property placed in service or plants planted/grafted after enactment.

• Increased Qualified Business Income Deduction (Section 5): Pass-through businesses (e.g., sole proprietorships, partnerships) can deduct 25% (instead of 20%) of qualified business income from taxes. Applies to taxable years beginning after enactment.

• New Food Retail Business Tax Credit (Section 6): A new 15% tax credit for "new" qualified small food retail businesses (those starting operations in the prior three years) on investments in property, facilities, or equipment used for retail food sales. This credit is added to the general business credit under the tax code. Applies to taxable years beginning after enactment.

Significant Changes to Existing Law

• Amends the Internal Revenue Code of 1986 in multiple sections (47 for rehabilitation credits, 51 for work opportunity credits, 168 for depreciation, 199A for business income deductions) to provide higher benefits specifically for qualified small food retail businesses, without altering rules for other businesses.
• Introduces a entirely new tax credit (Section 45BB) for startup investments in these businesses, expanding the list of general business credits.
• Raises asset thresholds and income/receipt percentages for eligibility, and ties qualifications to USDA's HHI data—a novel integration of economic metrics into tax eligibility.
• All changes are targeted and temporary in scope (e.g., tied to placement in service or startup timing), but effective immediately upon enactment without sunsets specified.

Potential Impacts

• On Government Agencies: The IRS will need to administer new and expanded credits, potentially increasing compliance and verification workloads (e.g., confirming HHI data from USDA). Could lead to reduced federal tax revenue due to higher deductions and credits, estimated in billions over time depending on uptake.
• On Citizens: Residents in low-competition areas (often urban or rural "food deserts" with few grocery options) may gain better access to affordable fresh food, potentially lowering prices through increased market competition. Could create jobs in retail and construction.
• On International Relations: Minimal direct impact, as the bill focuses on domestic U.S. tax policy and food retail; no provisions affect trade or foreign entities.
• Broader Economic Effects: Encourages investment in small businesses, which might stimulate local economies but could face challenges if large retailers dominate or if administrative hurdles limit participation.

Main Stakeholders Affected

• Small Food Retail Businesses: Primary beneficiaries, especially startups or rehabilitators in concentrated markets, gaining financial relief to enter or expand.
• Consumers in Low-Competition Areas: Indirectly benefit from potential price reductions and improved food access.
• Large Food Retailers: May face increased competition, potentially pressuring their market share in targeted counties.
• Employees: Gain from higher hiring incentives via the work opportunity credit, particularly in underserved communities.
• Federal Government (IRS and USDA): Responsible for implementation, data measurement (HHI), and revenue oversight.
• Local Communities and Investors: Could see economic revitalization in high-concentration areas, attracting capital for food infrastructure.

Notable Legal, Constitutional, or Political Implications

• Legal: Fully within Congress's constitutional authority to levy and regulate taxes (Article I, Section 8). Relies on existing tax code frameworks, reducing litigation risk, but may require IRS guidance on HHI calculations to ensure fair application. No apparent conflicts with antitrust laws, as it promotes competition.
• Constitutional: Neutral; does not infringe on states' rights or equal protection, though geographic targeting (by county HHI) could raise questions if seen as favoring certain regions—unlikely to be challenged.
• Political: Addresses bipartisan concerns like food insecurity and inflation, potentially appealing to urban/rural districts. Could spark debate on tax expenditures (subsidies via credits) versus direct spending, or equity in benefiting small versus large businesses. As introduced in the 119th Congress (2025), its passage depends on Ways and Means Committee approval amid broader tax reform discussions.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Sherrill, Mikie [D-NJ-11]

Cosponsors (2)

Rep. Hayes, Jahana [D-CT-5], Rep. Thanedar, Shri [D-MI-13]

Recent Actions

• 2025-01-23: Referred to the House Committee on Ways and Means.
• 2025-01-23: Introduced in House
• 2025-01-23: Introduced in House

Bill Versions

• Restoring Establishment Deductions and Uplifting Competition to Ease Food Prices Act — issued 2025-01-23 — PDF (8 pages)