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New York Allows Cannabis Business Owners to Deduct Business Taxes at State Level

A statewide decoupling from IRC 280e, a major update for business owners in the cannabis industry, was included in New York state’s 2022-2023 budget and signed into law last month by Gov. Kathy Hochul. The code, still enforced at the federal level, prohibits cannabis business owners from deducting ordinary business expenses from their taxes. Here’s what you need to know about the recent ruling in New York:

 Key Takeaways

  • Win for social equity businesses

As part of its efforts to diversify the cannabis industry, New York legislators set a goal of awarding 50% of all cannabis business licenses to social equity businesses – and this budget update will help make this goal a reality. As most businesses experience losses for the first 2-3 years, business owners rely heavily on tax deductions and access to capital. Tax relief options will help all cannabis entrepreneurs, especially social equity business owners.

  • No changes at the federal level

Though New York has officially decoupled from 280e, the federal government has not. While business owners will be allowed to deduct business expenses at the state level, their federal taxes will have to remain in 280e compliance. New York is not the first state to decouple from 280e (California decoupled last year) and will likely not be the last. As more states decouple or legalize adult cannabis use, it will be interesting to see how federal changes unfold.

Janover’s team of experts is staying up-to-date on all new cannabis regulation. For more information or to speak to a cannabis team member, contact us today.

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