New York State lawmakers finally wrapped up the state's $220 billion budget and it looks like cannabis companies have reason to be pleased, maybe even celebrate.
As it stands, cannabis companies not only have no access to the country’s banking system they are also not permitted to claim certain federal tax deductions like the rest of us. This tax ruling, established in the Internal Revenue Code as 280E section, maintains that state-legal marijuana businesses do not qualify for most common business deductions and credits.
However, the budget proposal sent to Gov. Kathy Hochul’s desk includes provisions that New York State’s cannabis companies will be allowed to claim tax deductions on their businesses and credits at the state level despite marijuana’s antiquated and erroneous classification as a Schedule I drug.
What’s In The Budget For Legal Cannabis?
Once the budget deal was reached, New York State Senator James Sanders Jr. said there’s “more good than bad in the 2022-2023 NYS budget.” The good includes sufficient funding earmarked for education, health, housing and human services, the environment and no new taxes.
And even better is what's in the budget for cannabis companies.
“$50 million investment into a Cannabis Social Equity Fund, which, matched by $150 million in private investment, will finance capital costs for cannabis dispensaries operated by social equity licensees. The Senate successfully negotiated stronger provisions establishing the rights of social equity licensees, oversight, transparency and State control of the private fund,” Sanders wrote in a press release, adding that the budget “allows cannabis businesses to deduct their business expenses.”
What Does This Mean For Cannabis Investors?
The exemption not only enables cannabis companies to benefit from tax deductions, it also sets the stage for those businesses to claim state credits that would otherwise be barred on federal returns.
“The separation of the federal law and state tax code would ultimately save NY-based cannabis companies a bundle of money,” wrote Patrick Lyon in the Dales Report.
“The overarching aim of the policy changes is to make it easier for cannabis businesses to conduct business and remain profitable across the long haul, benefitting business owners as well as cannabis investors,” Lyon wrote.
The proposed tax policy regarding exemptions for cannabis companies, which is likely to be signed by Gov. Hochul, would take effect immediately and apply to taxable years beginning on and after January 1, 2022.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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