Under the Internal Revenue Service (IRS) code 280E, the marijuana industry remains blocked from taking federal deductions, which precludes entities that illegally sell Schedule I or II drugs from key tax deductions in their federal filings.
However, as partial relief, the New Jersey Assembly passed a bill that would allow licensed cannabis businesses to deduct certain expenses on their state tax returns. The legislation, introduced by Assemblymember Annette Quijano (D) passed the House in a 60-6 vote.
For the purposes of New Jersey’s tax code, a licensed cannabis company's gross income “shall be determined without regard to section 280E of the [federal] Internal Revenue Code," reads the legislation. And continued “shall apply to taxable years beginning on or after January 1 following enactment.”
Last month, the measure, which is now headed to the Senate for consideration, was amended in the Assembly Oversight, Reform and Federal Relations Committee. At that time, its members agreed to remove a previous provision that would have made only cannabis license holders with gross receipts less than $15 million eligible for state tax deductions, reported Marijuana Moment.