Analysis shows that New Jersey’s delay in selling marijuana is not uncommon among legalized states
New York lawmakers have tabled budget proposals that include language to allow marijuana companies to take advantage of state tax deductions that are available to other industries despite an ongoing federal ban.
Both the Assembly and Senate budgetary measures, expected to be passed before April 1, aim to create an exemption that would allow cannabis companies to make the deductions while the state prepares to launch its market for cannabis Prepared for adult use. Retailers could start opening later this year.
This isn’t a problem unique to the New York City marijuana industry. Medical and adult cannabis businesses in the United States are barred from making certain state tax deductions under a section of the Internal Revenue Code known as 280E.
Under 280E, companies whose activities are in the “Controlled Substances Trade (as defined in Schedules I and II of the Controlled Substances Act)” cannot deduct most business expenses from their federal taxes or receive tax credits, although they are still required to pay taxes as any other company.
Since many states simply mirror federal tax policies in their own laws, the federal government’s anti-cannabis stance also blocks state-level deductions in some places.
As a result, some cannabis companies are paying effective tax rates of up to 80 percent, according to industry bodies and accounting firms.
To help resolve the issue, New York lawmakers in both houses added in their respective budget proposals that beginning this tax year through January 1, 2025, “the provisions of Section 280E of the Internal Revenue Code relating to expenses related to the illegal Sale of drugs, for purposes of this chapter, does not apply to the carrying on of any trade or business that is a commercial cannabis activity by a licensee.”
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Senator Jeremy Cooney (D) filed a standalone bill in December that would provide a similar spin-off for the state’s burgeoning cannabis market. MP Donna Lupardo (D) followed her example in her Chamber.
“I filed it at the request of the industry,” Lupardo told Cannabis Wire, which was the first to report the marijuana-related budget language. “I have no resistance at all.”
She added that other states have been exploring similar strategies for their marijuana markets. The Missouri legislature, for example, sent the governor a bill that would have allowed medical cannabis companies to take tax deductions, but it was vetoed for reasons not specifically related to marijuana issues.
New York Senator Liz Krueger (D), who sponsored the adult legalization bill that former Gov. Andrew Cuomo (D) signed into law last year, also supports tax breaks for cannabis companies.
“The goal here is to decouple the state from the federal government in deducting business expenses so cannabis companies can deduct their state taxes (since they can’t do this from their federal taxes),” Krueger, chair of the Senate Treasury Committee, told Cannabis Wire. “All other companies can deduct operating expenses, and not being able to do so is a liability for the cannabis industry. We can’t solve the federal problem, but we can solve the state problem that was the impetus for this language.”
In a report released last year, congressional researchers examined tax policies and restrictions for the marijuana industry — and how those might change if a series of federal reform laws are enacted.
Meanwhile, regulators in New York last week rolled out a rule requiring people with prior marijuana convictions, or their family members harmed by criminalization, to receive the first round of marijuana retail licenses for adult marijuana use — before existing medical cannabis companies.
The development is part of what Gov. Kathy Hochul’s (D) administration is calling the Seeding Opportunity Initiative, which it also announced last week.
Office of Cannabis Management (OCM) Executive Director Chris Alexander said he expects more than 200 “judicially involved” applicants to receive the priority licenses under the proposal, with retailers potentially coming online by the end of the year.
The state has also taken separate steps to enable the industry to make product available by creating provisional marijuana cultivation and processing licenses for existing hemp companies that are taking specific steps to ensure justice in the nascent promote industry. Hochul signed this law into law late last month. This “Farmers First Program” is another of the three branches of the administration’s Seeding Opportunity Initiative.
Assembly Majority Leader Crystal Peoples-Stokes (D), who supported the legislation that created the Legalization Act and recently launched a justice-oriented political action committee that will place a strong focus on electing candidates who support the Supporting marijuana reform said, “We’re doing what no other state has done, by focusing on the people most criminalized by cannabis prohibition and by empowering New York farmers.”
As it stands, adults as young as 21 can possess and publicly use cannabis, as well as gift marijuana to other adults, so long as they are not compensated. But regulators are still finalizing licensing rules, and there are currently no retailers authorized to sell adult-use cannabis in the state.
Hochul has repeatedly emphasized her interest in the efficient implementation of the legalization law.
The governor released a state of the state book in January calling for the creation of a $200 million public-private fund specifically to help advance social justice in the state’s burgeoning marijuana market. This funding, dubbed the New York Social Equity Cannabis Investment Program, is the final component of the Seeding Opportunity Initiative.
Hochul said that while cannabis business licenses have yet to be approved since legalization was signed last year, the market will generate billions of dollars and it’s important to “create opportunities for all New Yorkers, especially those from the historically marginalized.” communities”.
This proposal was also mentioned in the governor’s executive budget, which was released in January. The budget also estimated that New York will generate more than $1.25 billion in marijuana tax revenue over the next six years.
Passing legislation that speeds up licensing could help the state reduce the number of companies that effectively use the statutory “gift” provision of the state’s marijuana law to give away cannabis “for free” when a purchase is made that has nothing to do with marijuana.
New York regulators recently warned more than two dozen companies they are accusing of either selling marijuana illegally without a license or exploiting the “gift” component.
Here are some other ways New York lawmakers and regulators are working to build on the legalization act as the state prepares to implement retail sales:
In February, for example, a state senator introduced a bill that would encourage recycling in the marijuana industry once retail sales officially begin.
Sen. Michelle Hinchey (D) also supports this legislation, which would require cannabis stores to collect a $1 deposit on all marijuana products sold in single-use plastic containers and also reimburse consumers for that fee when they return the containers .
The senator is also behind a separate bill filed last year that would prioritize hemp-based packaging over synthetic plastics for marijuana products.
The recycling bill is identical to a Assembly version tabled by MP Patricia Fahy (D) last year.
The State Department of Labor separately announced in a recent policy that New York City employers can no longer test most workers for marijuana.
Meanwhile, in June, a New York lawmaker introduced legislation that would require the state to create an institute to research the therapeutic potential of psychedelics.
Another state legislature introduced legislation in December to legalize psilocybin mushrooms for medicinal purposes and establish facilities where the psychedelic can be grown and administered to patients.
As New York prepares to launch its adult-use marijuana market, OCM announced a significant expansion of its existing medical cannabis program.
Now physicians can make medicinal marijuana recommendations to people for any condition they think cannabis could treat, rather than relying on a list of specific diseases to consider.
The Rhode Island Senate committee is debating the marijuana legalization bill, with proponents pushing for a justice revision