Under the new state law, the business subject to the corporation business tax will be allowed to deduct from income all ordinary expenses associated with managing a licensed cannabis business
New Jersey Governor Phil Murphy has signed a bill into law that makes it possible for New Jersey cannabis businesses to deduct some expenses on state tax returns by decoupling them from federal rules.
Since cannabis is federally prohibited, cannabis businesses were not allowed to deduct expenses like normal businesses would (Section 280E of the IRS Tax Code). Under the new state law, the business subject to the corporation business tax will be allowed to deduct from income all ordinary expenses associated with managing a licensed cannabis business, including the opportunity to qualify for research and development deductions.
The measure was sponsored by state Sens. Troy Singleton, D-Burlington, and Shirley K. Turner, D-Mercer, and Assemblywoman Annette Quijano, D-Union.
“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 law aims to level the playing field for all cannabis businesses,” Singleton said in a statement shortly after the bill became law. “It will ensure that dispensaries are paying a fair amount of taxes by taking into account critical business expenditures and allowing these deductions from their income.”
The legislation’s language was largely influenced by the Cannabis Interest Group of the New Jersey Society of Certified Public Accountants
“We applaud the initiative and efforts taken by bill sponsors Assemblywoman Annette Quijano and state Sen. Troy Singleton,” Ralph Albert Thomas, NJCPA executive director, said in the wake of the bill’s passage. “They quickly recognized the importance of addressing this little-understood but critically important issue and tirelessly pushed for its passage.”
Stacey Udell, an accountant at HBK Valuation with many clients in New Jersey’s nascent legal market, said the new law will offer much needed relief.
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