New Jersey Governor Phil Murphy signed legislation this week that allows additional tax deductions for licensed cannabis operators in the state.
Assembly Bill 3946 enables New Jersey cannabis operators to deduct all standard business expenses from their gross income. The legislation decouples state tax provisions from Section 280E of the Internal Revenue Code, which prohibits companies associated with Schedule I or Schedule II substances from deducting standard business expenses on tax filings.
The legislation, signed into law by Gov. Murphy on Monday, specifically applies to businesses that are subject to the corporation business tax and have less than $15 million in gross income. The deductions are also allowed for S corporations with less than $15 million in gross income.
“We have seen here in New Jersey, and around the country, that legal cannabis businesses tend to lack diversity both in gender and race amongst its ownership ranks. This law aims to level the playing field for all cannabis businesses,” Senator Troy Singleton, who sponsored the bill, said in a news release. “It will ensure that dispensaries are paying a fair amount of taxes by taking into account critical business expenditures and allowing these deductions from their income.”
The New Jersey Cannabis Trade Association applauded the legislation, saying it will provide “a sense of normalcy that our industry will cherish.”
“The New Jersey Cannabis Trade Association celebrates today’s historic signing decoupling Section 280E of the IRS Tax Code from the state’s tax code,” the New Jersey Cannabis Trade Association said in a tweet. “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. Now, New Jersey’s licensed cannabis operators will be treated like any other legal enterprise operating in New Jersey, a sense of normalcy that our industry will cherish.
“Thank you to Governor Phil Murphy, Assemblywoman Annette Quijano and Senator Troy Singleton for your stewardship on this reform that will provide a more economically viable landscape for our young industry and those wishing to enter it,” NJCTA added.