BRAND NEW YORK – The Senate Budget and Appropriations Committee has recently moved legislation sponsored by Senators Troy Singleton and Shirley K. Turner that would exempt the corporate business tax and the S corporation income under the gross income tax from the federal income tax provision that prohibits deductions and credits for cannabis businesses.
“It has been our experience in New Jersey and elsewhere that the ownership of legal cannabis firms is not very diverse in terms of gender or color. According to Singleton, “the goal of this plan is to provide a level playing field for the cannabis industry” (D-Burlington).
Since it would allow dispensaries to deduct necessary business expenses from their income, it would ensure that they are paying their fair share of taxes.
The proposed legislation, S-340, would allow a corporation that engages in the cannabis business to deduct from its taxable revenue all regular and necessary business expenses incurred in the course of operating a registered cannabis business.
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Regardless of gross revenue, the deduction would still be available for other types of business income under the gross income tax, and it would be allowed for computing the S corporation income of cannabis business firms.
Turner (D-Mercer/Hunterdon) argued that since “New Jersey’s cannabis economy is still in its infancy,” swift action was necessary to ensure that all firms have a fair shot at success.
“It’s better for our local economy if we support dispensaries while promoting diversity within the cannabis sector,” said one expert, “and it helps ensure that the proceeds from recreational cannabis are being routed back into the places that need it most.”
When determining taxable income for purposes of the State’s corporate business tax and for S corporation income, the amount that is taxable under federal income tax law serves as a starting point.
Businesses that deal in schedule I or II restricted substances, like cannabis, are not eligible for federal tax deductions or credits. As a result, cannabis businesses have a larger federal income tax liability than other businesses with comparable income because they cannot deduct business expenses.
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