New Jersey Gov Murphy Signs Law Relieving Cannabis Companies Of Punitive IRS Tax Code, Who's Next?

New Jersey Gov. Phil Murphy did the cannabis industry in his state a huge favor when he signed a law decoupling marijuana businesses from federal IRS Code Section 280E, the bane of the industry’s collective existence. 

What happened: The legislation, written by New Jersey Society of CPAs Cannabis (NJCPA) Interest Group, alleviates the cannabis industry from the IRS code that essentially penalizes anyone who sells “Schedule I or II controlled substances” from being able to deduct business expenses like other companies. And, as we know, cannabis is still classified as a Schedule I drug. This comes several months after the legislature approved the measure with amendments.

The new New Jersey law applies to tax years beginning on and after Jan. 1, 2023. 

“NJ has joined the short list of other states that have provided a much-needed offset to the onerous 280E tax that is crippling many operators in cannabis, large and small,” said Morgan Paxhia, co-founder and managing partner of Poseidon Investment Management, per Green Market Report, which first reported this story

IRS Code Section 280E And Cannabis Operators Overpaying Taxes

Thanks to 280E cannabis operators paid over $1.8 billion in additional taxes as compared to ordinary businesses, an outrage forecasted to increase to $2.1 billion in 2023.

The New Jersey legislation also removes the $15 million cap on revenue to qualify for deductions and credits for ordinary and business expenses.

Thank You Governor!

“We want to thank Governor Murphy and the state of New Jersey for passing this law allowing cannabis businesses to be taxed like any other industry in the state,” said Matt Darin, CEO, of Curaleaf CURLF, per Green Market. “This much-needed state tax reform takes an unnecessary financial burden off the industry and it will allow businesses to focus on growth and job creation. By reducing the tax burden, social equity businesses across the state will be better positioned to thrive and become profitable.”

Photo: Benzinga edit with Stokkete and Yarygin on Shutterstock