New Jersey Governor Phil Murphy this week signed legislation to grant record tax deductions to licensed cannabis companies in a move aimed at improving the viability of the state’s regulated marijuana industry. The measure, which separates New Jersey tax laws from Section 280E of the federal tax code, was signed into law by Murphy on Monday after the bill passed the state legislature in February.
In many states that have legalized cannabis for recreational or medical use, tax laws follow the lead of Section 280E of the federal tax code, which forbids most standard business tax deductions for cannabis. Under this rule, cannabis operators are only allowed to deduct cost of goods sold, while other standard business expenses such as rent, payroll, and utilities are not allowed for most businesses.
Bill Democratic Assembly members Annette Quijano, Clinton Calabrese and Lynda Carter passed by the New Jersey General Assembly on February 27. Companion measureSponsored by Democratic state senators Troy Singleton and Shirley Turner, it was also passed in the state Senate the same day by a vote of 32-3.
Under the new legislation, which takes effect immediately and is effective for tax years beginning January 1, 2023, cannabis companies will be allowed to deduct certain business expenses from their state tax returns. The bill does not affect the federal tax liability owed by corporations. Legislative sponsors say the bill will help improve diversity in the regulated cannabis industry, which faces severe barriers to entry and high taxes and regulatory fees.
“We’ve seen here in New Jersey, and across the country, that legal cannabis companies tend to lack diversity in both gender and ethnicity among the ownership ranks,” he said. Singleton said In a statement reported by local media. “This law aims to level the playing field for all cannabis businesses.”
He added, “It will ensure that dispensaries pay a reasonable amount of taxes by taking into account critical business expenses and by allowing these deductions from their income.”
“The cannabis industry in New Jersey is still in its infancy, and we need to act early to provide a level playing field for all businesses to succeed,” said Turner. “Supporting dispensaries while promoting diversity within the cannabis industry is better for our local economy and also helps ensure that profits from recreational cannabis are redirected to the communities that need it most.”
Legislation to grant standard business tax deductions to New Jersey cannabis companies is also supported by representatives of the regulated cannabis industry, including the New Jersey Cannabis Trade Association (NJCTA), a trade group that said the legislation “will provide a more economically viable landscape for our industry.” lads and for those who wish to enter it.”
“Continued implementation of 280E has placed many financial constraints on cannabis operators, large and small, by preventing them from deducting joint business expenses from their taxes,” the NJCTA said in a statement. “Now, licensed cannabis operators in New Jersey will be treated like any other legal establishment operating in New Jersey, a sense of normalcy that our industry will cherish.”
James Leventis, executive vice president of legal, compliance and government for Verano, a company that operates three Zen Leaf dispensaries in New Jersey, applauded the passage of the new legislation, saying it removes “a major barrier that has impeded entrepreneurship and growth for the cannabis industry across the country.”
Leventis wrote in an email to: High times. “I hope to see similarly courageous actions by leaders across additional states — and, most importantly, at the federal level — to introduce more cannabis reforms that will allow our industry to finally reach its full potential as a catalyst for positive economic and social progress across the United States.”
Other states that have legalized marijuana including New York, California, Hawaii, Michigan, Colorado and Oregon have passed legislation to separate state tax laws from Section 280E. Similar legislation is Hanging in Connecticut.