By a vote of 60 to 6 the New Jersey Assembly has voted to pass legislation allowing licensed marijuana retail outlets to deduct expenses on their state tax return.
Photo credit: Associated Press.
The move is being 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.
The measure (Bill A3946), introduced by Assemblymember Annette Quijano, will now need to pass the state’s Senate before it can be sent to Governor Phil Murphy for final consideration. If it is sent to the governor, he would have the option of signing it into law, allowing it to become law without a signature or vetoing it. If he chooses the latter, the legislature could override the veto with a two thirds super-majority.
The legislation 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.
If passed the bill 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.”
