New Jersey Gov. Phil Murphy (D) on Monday signed a bill to allow the state’s cannabis businesses to deduct some business expenses on state tax returns, NJ.com reports. Under the law, the business subject to the corporation business tax will be allowed to deduct from income all ordinary expenses associated with managing a licensed cannabis business, including the opportunity to qualify for research and development deductions.
The legislation essentially decouples cannabis businesses in the state from federal Internal Revenue Service Code Section 280E, a 1982 provision that prohibits the standard business tax deductions for operations associated with illegal drug trafficking.
In a statement posted on Twitter, the New Jersey Cannabis Trade Association said the law allows state-approved cannabis businesses to “be treated like any other legal enterprise operating in New Jersey” and that the industry “will cherish” the “normalcy.”
“The continued implementation of 280E placed severe financial constraints on cannabis operators, big and small, by prohibiting them from deducting common business expenses from their taxes.” — New Jersey Cannabis Trade Association in a statement
Following the bill’s signing, State Sen. Troy Singleton (D), one of the bill sponsors, said the law “aims to level the playing field for all cannabis businesses.”
“It will ensure that dispensaries are paying a fair amount of taxes by taking into account critical business expenditures,” he said, “and allowing these deductions from their income.”
The law takes effect immediately and applies to taxable years beginning on or after January 1, 2023.
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New Jersey Gov. Signs Cannabis Industry Tax Reforms Bill