Yo, what’s good? It’s ya boy Dan, and I’m here to talk about some dope news for the cannabis industry in Connecticut. There’s a bill on the table that could let businesses in the state get tax deductions like other industries. That’s right, we’re talking about saving those greenbacks, baby. If this bill goes through, it could save the cannabis industry $4.7 million in the fiscal year starting July 1, growing to nearly $10 million by 2026.
Now, in other states where weed is legal, they follow the lead of Section 280E of the federal tax code. This rule denies most standard business tax deductions for cannabis businesses. Wack! I mean, come on, how you gonna deny businesses the chance to save some money? Under this rule, cannabis businesses can only deduct the cost of goods sold. That means they can’t take deductions for things like rent or payroll. That ain’t fair!
But, Democratic Representative Jason Rojas has proposed a bill that would let cannabis businesses in Connecticut get standard business expense deductions on their state tax returns. This is a big step forward, even if Section 280E still applies to their federal tax liability. It’s not a huge windfall for these companies, but it will make them more competitive with neighboring Massachusetts and Rhode Island, where weed prices are lower.
Rojas spoke with the Hartford Business Journal about the legislation and said that anything that can be done to reduce costs for cannabis businesses is a win for the state. And I gotta say, I agree with him. Adam Wood, president of the Connecticut Cannabis Chamber of Commerce, thinks this bill will benefit both businesses and consumers. He said it would likely result in lower retail prices and bring more people to the regulated market, which means more tax revenue over time.
The lack of standard business deductions makes it tough for entrepreneurs to succeed and grow their businesses. This is especially true for social equity businesses, which often have a harder time raising capital to launch their enterprises. Tiana Hercules, a Hartford city council member who was recently awarded a provisional cannabis cultivation license through the state’s Social Equity Council, said that the federal tax rule has its roots in the War on Drugs. She’s right – it’s not right that these businesses are being penalized like they’re not legit.
Nineteen states with legal weed have decoupled their tax laws from Section 280E, including New York and Massachusetts. Rojas’ bill is currently under consideration by the Connecticut General Assembly’s Finance, Revenue & Bonding Committee. Brian Vicente, founding partner of cannabis law firm Vicente LLP, thinks this bill is a smart move by Connecticut. He said that for too long, state-legal weed businesses have been beholden to draconian federal taxes. He thinks allowing cannabis businesses to make traditional deductions of overhead, equipment, and labor will lead to healthier businesses in Connecticut.
The Legislative Finance Committee will soon begin voting on items to be included in the budget for the next fiscal year. Rojas said he hopes his colleagues in the legislature will support the tax changes in HB 5413. It’s going to be part of a larger discussion on revenue and whether they can approach things differently. But, Rojas is hopeful that there will be room in the budget for it.
Overall, this bill could be a game-changer for the cannabis industry in Connecticut. It’s time to level the playing field and let these businesses get the same tax deductions as other industries. Let’s hope this bill goes through and we see some positive change for the cannabis industry in the state. Peace out!
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