The Deduction of Cannabis Business Expenses Following New York’s 2023 Budget

The Deduction of Cannabis Business Expenses Following New York’s 2023 Budget
CANNANNEW REPORT

The 2023 Budget Last week, the New York Legislature passed the State’s 2022-2023 Budget. The $220 billion Budget reflects an $8 billion increase over last year’s budget (a more than 3 percent jump). It is also $4 billion more than what the Governor had initially proposed. In fact, it is the largest spending bill ever to have been enacted by Albany. Louis Vlahos I suppose the explanation is obvious: bolstered by still unspent Federal stimulus money[i] and better than expected tax revenues, the Governor and the Legislature decided to be especially generous to their constituents during this election year.[ii] Taxes Although the Budget includes the usual categories of expenditures we have come to expect from Albany, it also introduces certain tax-related measures, some of which are certain to be welcomed by the general business community, and a few that may be meaningful to certain industries. For example, pursuant to an amendment to the Pass-Through Entity Tax,[iii] if an electing S corporation certifies that all its shareholders are New York residents, its tax base for purposes of calculating the tax will be expanded to include non-New York source income on which the resident shareholders are subject to tax in the State. In addition, the Budget enacted a New York City version of this entity-level tax.[iv] The foregoing measures will enable many New York business owners, across many industries, to further reduce their federal income tax liability by taking greater advantage of the limited SALT cap workaround “approved” by the IRS in 2020 and adopted by New York in 2021.[v] Cannabis Of course, as is often the case, the Budget also contains other measures that are more industry specific. Among these is a tax provision that the Legislature hopes will benefit a relatively new industry that Albany[vi] has sought to foster over the last few…

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