Connecticut Latest in String of States to Enact 280E Relief

June 14, 2023 · Green Market Report

Cannabis companies will be able to deduct business expenses at the state level.

Connecticut on Tuesday became the latest in a national trend of states with operational marijuana markets to approve state-level relief from the 280E provision of the federal tax code.

According to Marijuana Moment, the new state budget that Gov. Ned Lamont signed will let cannabis companies claim state tax breaks in the same amount they would have been entitled to from the federal government if 280E did not exist.

The 280E provision is one of the biggest hurdles to profitability for U.S. marijuana companies, because it precludes them from claiming standard business tax deductions on their federal returns, often resulting in a federal tax rate of 80% or 90%.

Connecticut lawmakers are just the latest state lawmakers to attempt a 280E offset with which to boost their licensed marijuana industries. Other states that have passed similar measures include:

  • Illinois
  • Iowa
  • New Jersey
  • New York
  • Pennsylvania
  • Virginia

The 280E provision is a top target for cannabis advocates in Washington D.C., because it only applies to companies that traffic in federally controlled substances on Schedules 1 and 2, but not Schedule 3 or lower.

Given that the Biden administration is currently conducting a formal review of marijuana’s status as a Schedule 1 narcotic, some are hopeful that cannabis will be at least moved to Schedule 3, which would increase profit margins industry-wide overnight. (Full Story)

In category:Business
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