New York’s Senate has approved a bill that would provide tax relief to New York City cannabis businesses, reports Marijuana Moment, noting that, before the passing of the bill, those cannabis businesses were blocked from making federal deductions under an Internal Revenue Service (IRS) code known as 280E.
According to a summary, the bill would enable “a deduction for business expenses, incurred by taxpayers authorized by the Cannabis Law to engage in the sale, distribution, or production of adult-use cannabis products or medical cannabis, for purposes of the unincorporated business tax (UBT), the general corporation tax (GCT), and the corporate tax of 2015, commonly referred to as the business corporation tax (BCT).”
“This modification to income is appropriate because, while the expenses of cannabis-related business cannot be deducted for federal purposes, New York law permits and encourages these businesses akin to any other legitimate business occurring in the State,” a memo attached to the bill says. “The City’s business taxes should similarly encourage these business activities.”
It also notes that the reform legislation has the support of New York City Mayor Eric Adams (D).
Lawmakers in several states have pursued the tax workaround as congressional marijuana reform legislation continues to stall, leaving state-licensed cannabis businesses with significantly higher federal effective tax rates under prohibition.
For example, the Illinois legislature recently approved a budget bill that includes similar provisions to allow licensed marijuana businesses to take state tax deductions that they’re currently prohibited from utilizing at the federal level. That measure has been sent to the governor’s desk.
In April, the governor of New Jersey signed legislation to allow licensed marijuana businesses to deduct certain expenses on their state tax returns as a partial IRS 280E workaround. Lawmakers in Iowa, New York, Pennsylvania and Virginia have similarly pursued tax relief for each of their state’s marijuana markets.
At the congressional level, Rep. Earl Blumenauer (D-OR) reintroduced a bill in April that would amend the IRS code to allow state-legal marijuana businesses to finally take federal tax deductions that are available to companies in other industries.
