After being approved by the New Jersey State Legislature, a measure that would provide some tax relief to the state’s emerging legalized cannabis industry is heading to Gov. Phil Murphy’s desk.
Under Assembly Bill 3946/Senate Bill 340, the state’s corporate business tax provisions would be decoupled from federal rules prohibiting deductions and credits for cannabis businesses, ultimately allowing licensed cannabis companies in New Jersey to deduct certain expenses on state tax returns.
Under Section 280E of the Internal Revenue Service (IRS) code, cannabis-related ventures are blocked from deducting typical business expenses on state and federal tax returns since marijuana is classified as a Schedule I narcotic by the federal government.
The measure, which was sponsored by Assemblymembers Annette Quijano, D-20th District; Clinton Calabrese, D-37th District; and Linda Carter, D-22nd District, was approved Feb. 27 by the Assembly in a 59-8 vote.
Companion legislation by state Sens. Troy Singleton, D-7th District, and Shirley Turner,D-15th District, also passed the same day in a 32-3 vote.
In a statement, Singleton said, “We have seen here in New Jersey, and around the country, that legal cannabis businesses tend to lack diversity both in gender and race amongst its ownership ranks. This proposal would aim to level the playing field for all cannabis businesses. It would ensure that dispensaries are paying a fair amount of taxes by taking into account critical business expenditures and allowing these deductions from their income.”
“New Jersey’s cannabis industry is still in its infancy, and we need to act early to provide equal opportunity 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 to ensure that the profits from recreational cannabis are being funneled back into the communities that need it most.”
If signed into law by Murphy, New Jersey will join a growing number of states to decouple from IRS code Section 280E, including California, Colorado, Hawaii, Michigan, New York and Oregon.
In a statement, New Jersey CannaBusiness Association (NJCBA) president Edmund DeVeaux said, “The NJCBA applauds the Legislature for demonstrating leadership in furthering the normalization of the cannabis industry.”
He went on to thank Singleton, Turner and Quijano “for their strong advocacy on this issue,” saying, “For too long, legitimate businesses have been discriminated against based on outdated and unjust policies. As far as cannabis policy is concerned, New Jersey continues to be the legislative and regulatory model for the nation.”