New York Marijuana Businesses Would Get State Tax Breaks Despite Federal 280E Provision Under Budget Deal

New York Marijuana Businesses Would Get State Tax Breaks Despite Federal 280E Provision Under Budget Deal
MJ moment

New York lawmakers have reached a tentative deal on a budget proposal that includes provisions to let marijuana businesses take state tax deductions that are available to other industries despite an ongoing federal ban on cannabis. Senate and Assembly leaders had included the reform proposal in earlier versions their respective budget measures last month, but there’s been uncertainty about what the final product would look like as lawmakers and Gov. Kathy Hochul (D) worked to reach consensus on unrelated issues, forcing an extension of the budget deadline for a week. But on Thursday, an agreed-upon framework was unveiled, with votes expected soon. With respect to cannabis, the proposals would carve out an exemption, making it so marijuana companies would be allowed to make tax deductions for business expenses and claim credits at the state level that they’re currently barred from utilizing on their federal returns under prohibition. Medical and adult-use cannabis companies across the U.S. are precluded from making certain federal tax deductions under an Internal Revenue Code section known as 280E. By decoupling state tax code from the federal law in this respect, New York marijuana businesses would see significant tax savings. Under 280E, businesses whose activities consist of “trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act)” cannot make deduct most business expenses from their federal taxes or receive tax credits, even though they are still obligated to pay taxes like any other company. Because many states simply mirror federal tax policy in their own codes, the federal government’s anti-cannabis stance also blocks state-level deductions in some places. As a result, some cannabis businesses pay effective tax rates of up to 80 percent, according to industry groups and accounting firms. To help resolve the issue, New York legislative leaders in both chambers agreed to…

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Source : New York Marijuana Businesses Would Get State Tax Breaks Despite Federal 280E Provision Under Budget Deal

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