The Illinois governor has signed a bill that includes provisions to allow licensed cannabis businesses to claim state tax deductions, which they are currently prohibited from using at the federal level because of an Internal Revenue Service code (IRS) known as 280E.
Gov. J.B. Pritzker, (D), gave the final approval of the legislation last week. It also includes language directing funds to a Cannabis Development Fund and extending a deadline to conditional licensees in order to find storefronts.
The key section of the law that has now been passed decouples marijuana business from federal tax policy. This policy currently prohibits the industry from taking key deductions available to other markets.
Signed, sealed, delivered pic.twitter.com/EwyoKEJ6oM
— Governor JB Pritzker (@GovPritzker) June 7, 2023
The state will add a provision to its existing tax code that allows cannabis businesses to deduct “an amount equaling the deductions which were disallowed by Section 280E for the taxable period” starting with the current tax season.
The legislature passed the budget, which included a few marijuana provisions. However, a separate cannabis omnibus bill that would have limited delta-8 THC-containing products was stalled before the end of session.
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Illinois joins several other states in introducing rules that treat marijuana like a conventional market, by offering tax relief.
As an example, on Monday the Connecticut governor signed a budget bill that included provisions for state-level tax relief for licensed marijuana businesses. This is a workaround to the federal 280E regulations.
The governor of New Jersey also signed legislation to allow licensed marijuana business to deduct some expenses on their state taxes as a partial IRS fix 280E. Lawmakers from Iowa New York Pennsylvania, and Virginia also pursued similar tax reliefs for their respective marijuana markets.
Last week, the New York Senate approved a bill to fix the 280E tax code for New York City’s cannabis companies on a local level. The statewide reform had already been implemented and did not affect the city’s own
Last month, Rep. Earl Blumenauer of Oregon (D) reintroduced , a bill that would amend IRS code in order to allow marijuana businesses that are legalized by state to take advantage of federal tax deductions available to other
He told Marijuana Moment he is “absolutely certain that when we can fully deduct the business expenses of people that actually there will be more revenue collected , because they will comply with the law.”
The marijuana industry is still facing tax policy challenges as a result of the prohibition. The Congressional Research Service (CRS), in a report from 2021, noted that IRS “has provided little tax guidance regarding the application of Section 280E.”
In a 2020 update, the IRS provided some guidance. It explained that, while cannabis businesses cannot take standard deductions for their gross receipts, 280E doesn’t “prevent a participant in marijuana industry from deducting its gross revenue by its
The IRS update appeared to be in response to a Treasury Department Internal Watchdog Report released in 2020. IRS was criticized by the department’s inspector for tax administration for not adequately advising taxpayers in marijuana businesses about federal tax laws. It also directed the agency “to develop and publicize specific guidance for the marijuana industry.”
Since years, bipartisan and bicameral legislators have worked to pass legislation to treat the cannabis industry like other legitimate businesses. This is through the Secure and Fair Enforcement Banking Act (SAFE), which was heard in the Senate Banking Committee earlier
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The first time Marijuana moment published the article Illinois governor signs bill allowing marijuana businesses to claim state tax deductions as a partial IRS 280E fix.
