New Jersey’s full legislature has passed legislation to allow legal marijuana businesses to take standard state-level tax deductions.
The New Jersey senate this week passed Bill A3946 by a vote of 32 to 3, roughly four months after the Assembly passed it by a vote of 60 to 6.
The legislation, which now heads to the governor for consideration, is seen as a partial remedy to IRS code 280E, which prevents federally illegal entities from taking tax deductions. Supporters of the move argue that with marijuana being legal under state law, there’s no reason or basis to deny state-level tax deductions from marijuana stores, even if they may be illegal federally.
Introduced by Assemblymember Annette Quijano, the proposal states that tax deductions for marijuana stores “shall be determined without regard to section 280E of the Internal Revenue Code.” This would not allow marijuana outlets to take federal tax deductions.
The measure would “apply to taxable years beginning on or after January 1 following enactment”.
“[P]roviding access to these deductions and credits may also help generate more economic activity by cannabis businesses”, says an analysis from the Office of Legislative Services (OLS). “[T]he State and local governments that tax cannabis businesses might indirectly realize an indeterminate amount of additional annual revenue. OLS notes that the legal adult-use cannabis industry in New Jersey is immature at the time of this writing, having only begun sales at limited locations in April of this year”, states the analysis. “The industry may significantly grow or change in unpredictable ways over the coming years, casting uncertainty over any fiscal estimate.”
