Connecticut Bill Would Allow State Tax Deductions for Cannabis Businesses

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A bill pending before Connecticut state lawmakers would allow businesses in the state’s nascent cannabis industry to take tax deductions commonly enjoyed by firms in other industries. In many states that have legalized marijuana for recreational or medical purposes, tax laws follow the lead of Section 280E of the federal tax code, which denies most standard business tax deductions for cannabis businesses. Adam Wood, president of the Connecticut Cannabis Chamber of Commerce, said that Rojas’ bill would benefit both businesses and consumers. Under the bill from Democratic Representative Jason Rojas, the House majority leader, cannabis businesses would be permitted to deduct standard business expenses on their state tax returns, although Section 280E would still apply to the firms’ federal tax liability. Under the rule, cannabis businesses are only allowed to deduct the cost of goods sold, while deductions for other business expenses such as rent, payroll and utilities are not allowed for most operators.

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A bill pending before Connecticut state lawmakers would allow businesses in the state’s nascent cannabis industry to take tax deductions commonly enjoyed by firms in other industries. If passed by the legislature and signed into law, the legislation is projected to save businesses in the cannabis industry $4.7 million in the fiscal year starting July 1, growing to nearly $10 million by 2026.

In many states that have legalized marijuana for recreational or medical purposes, tax laws follow the lead of Section 280E of the federal tax code, which denies most standard business tax deductions for cannabis businesses. Under the rule, cannabis businesses...

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