New York may give cannabis businesses tax relief
A bill that’s being debated in New York would give cannabis businesses some much-needed tax relief. A major problem for these businesses is that the federal tax code doesn’t allow them to write off many expenses that other businesses would write off because they’re selling a substance that is illegal at the federal level. This bill would change New York law to allow for more write offs to help these businesses that are heavily taxed.
“This bill will provide tax equity to the emerging cannabis industry by allowing licensed cannabis businesses to make ordinary and necessary deductions on their New York state taxes,” bill sponsor Sen. Jeremy Cooney (D) said. “Additionally, it ensures the adult-use cannabis market will not be dominated solely by large multi-state operators who can afford to pay the higher effective tax rate.”
Morgan Fox, media relations director at the National Cannabis Industry Association, told Cannabis News Box that this bill could really help cannabis businesses.
“Given the exorbitant costs of regulatory compliance, huge startup and operational expenses, and generally burdensome tax rates, any tax breaks would be a huge benefit to businesses in the Empire State,” Fox said. “I would imagine that the vast majority of expenses would be able to be written off at the state level under this plan.”
What would really help cannabis businesses is if the tax code, specifically Section 280E, was amended to make it so cannabis businesses could write off expenses that every other business is allowed to write off. That section of the law was created decades ago to prevent drug dealers from writing off their expenses. Fox said that Congress doesn’t seem likely to move on changing the tax code in this way in the near future.
“At the moment, there doesn’t appear to be much momentum for fixing 280E as a discrete and singular issue in Congress,” Fox said. “However, this would be de facto rectified if cannabis is descheduled, and there is a lot of momentum for that right now. How soon that will happen is impossible to tell, but I seriously doubt it will be in the next year. I hope I’m wrong.”
As Fox noted, the best solution to pretty much every problem cannabis businesses face would be simply legalizing cannabis at the federal level.
While most Democrats are behind legalizing cannabis, there hasn’t been much movement on legalization in recent months.