By A bill pending in the Connecticut legislature would allow companies in the state’s nascent cannabis industry to receive tax credits commonly enjoyed by companies in other industries. If passed, the legislation is projected to save cannabis industry companies $4.7 million in the fiscal year beginning July 1, growing to nearly $10 million by 2026.
In many states that have legalized marijuana for recreational or medical purposes, tax laws follow Federal Tax Code Section 280E, which denies most standard business tax deductions for cannabis businesses. Under the regulations, cannabis businesses are only allowed to deduct the cost of the goods they sell, but deductions for other business expenses such as rent, salaries and utilities are not allowed for most operators.
under invoice From House Majority Leader Jason Rojas, Democratic Rep., cannabis businesses will be allowed to deduct standard operating expenses from their state tax returns, but Section 280E will still apply to corporate federal tax liabilities. While not a big boon for cannabis companies, the change is expected to help Connecticut businesses better compete with recreational marijuana dispensaries in neighboring Massachusetts and Rhode Island, where prices are significantly lower. I’m here.
“Everyone I meet says it’s an incredibly difficult business to get into, especially because of the cost of capital required, but the regulatory environment is also very complex because you are dealing with regulated substances. federal level” Rojas said Hartford Business Journal on Law.
“If we want to see this market really succeed, I think it will be in the state’s interest to do anything to reduce the cost of doing business,” he added.
Adam Wood, president of the Connecticut Cannabis Chamber of Commerce, said the Rojas bill would benefit both businesses and consumers. and may increase tax revenue over time.
“All other businesses in the state are allowed to deduct overhead costs, equipment and labor.” Wood said CT Insider. “Our argument is that taking these state tax credits into account actually drives down the price because the net operating costs are not that high. Pricing is reasonable or under control. If they do, the regulated market will grow and the sales tax from these businesses will increase.”
The lack of standard business deductions makes it difficult for entrepreneurs to successfully and grow their businesses. This burden is particularly severe for social equity businesses, which often find it even more difficult to raise business capital to get their business off the ground. Hartford, Connecticut City Councilwoman Tiana Hercules was recently awarded an interim cannabis cultivation license through the state’s Social Equity Council.
“We are being punished like we are not a legitimate business,” Hercules said. “As part of the Social Equity program, we are to develop business acumen, hopefully earn a living, and build intergenerational wealth. We should be able to reinvest in our business, staff and innovation. If Connecticut wants a competitive and thriving cannabis industry, it makes a lot of sense, and we’re ready to generate a lot of excitement.”
So far, 19 states with legal cannabis, including nearby New York and Massachusetts, have separated their tax laws from federal Section 280E, allowing companies in the industry to receive business deductions. HB 5413 is currently being considered by the Connecticut Legislative Committee on Finance, Revenue and Bonds.
“Connecticut is wise to seek ways to help fledgling adult businesses succeed, and offering state-level tax breaks is a time-tested practice,” said the cannabis law firm. Brian Vicente, founding partner of Vicente LLP, wrote in an email: high times“For too long, state law-compliant marijuana businesses have been subject to harsh federal taxes, allowing cannabis businesses to traditionally deduct overhead, equipment, and labor to keep Connecticut businesses safe.” Connecticut is poised to follow the trend that Northeastern states, including New York and Massachusetts, have adopted state tax reform for canna businesses.”
The Legislative and Finance Committee will soon begin voting on items to be included in next year’s budget. In interviews with local media, the bill’s sponsors hope their colleagues in Congress will support the tax changes in HB 5413.
“This becomes part of the larger discussion about revenue, which is revenue loss, and there are many priorities, so whether we can approach this differently,” Rojas said. “But it’s a fast-growing market, and we’re looking at what other states are doing. It’s consumer friendly. I hope we have room in the budget.”
