Permits deductions for commercial cannabis activity including the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery, or sale of cannabis and cannabis products, or acting as the holder of an adult-use on-site consumption license.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8808
SPONSOR: Lupardo TITLE OF BILL:
An act to amend the tax law, in relation to permitting deductions for
commercial cannabis activity; and providing for the repeal of such
provisions upon expiration thereof
SUMMARY OF SPECIFIC PROVISIONS:
Section 1: allows licensed cannabis businesses to deduct ordinary and
necessary business expenses.
Section 2: provides the effective date.
JUSTIFICATION:
Due to section 280E of the Internal Revenue Code, legal cannabis busi-
nesses in New York will not be allowed to make any deductions when
paying state taxes. This means they will have to pay more taxes than
other legal businesses in the state. Not being able to make ordinary and
necessary business deductions significantly increases the costs of doing
business and creates a larger barrier to entry. New York legalized
adult-use cannabis with the focus on providing equitable opportunities
to those most impacted by the prohibition. New York cannot realize the
goals set in the MRTA for social and economic equity if the cost of
doing business prevents the equity candidates from participating. The
effective tax rate on cannabis businesses would be approximately double
what any other business have to pay. If this goes unchanged, people will
be unable or unwilling to leave the legacy market for a licensed busi-
ness.
This bill will provide tax equity to the emerging cannabis industry by
allowing licensed cannabis businesses to make ordinary and necessary
deductions on their New York state taxes. Additionally, it ensures the
adult-use cannabis market will not be dominated solely by large multi-
state operators who can afford to pay the higher effective tax rate.
PRIOR LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately.
