The governor of Connecticut has signed budget legislation that includes provisions to provide state-level tax relief to licensed marijuana businesses that are currently prohibited for making federal deductions under an Internal Revenue Service (IRS) code known as 280E.
Gov. Ned Lamont (D) approved the package on Monday, touting the overall tax relief and specifically highlighting how much money the cannabis industry is estimated to save with the new policy.
Giving marijuana businesses the state-level 280E workaround is expected to translate into $4.7 million in industry relief for the 2024 fiscal year, which will increase to $6.2 million in the 2025 fiscal year, the governor’s office said.
A separate, more comprehensive overview from the legislature’s Office of Fiscal Analysis shows those savings growing to $9.6 million in 2026, $11.4 million in 2027 and $13.5 million in 2028.
WATCH LIVE: Bill signing ceremony for the biennial state budget, which contains several tax relief measures including the largest income tax cut in Connecticut history.https://t.co/Nk8RMpZquO
— Governor Ned Lamont (@GovNedLamont) June 12, 2023
The newly enacted budget measure also contains provisions on appropriations for cannabis social equity, substance misuse prevention and regulation efforts. And it further repeals a tax credit for marijuana “angel investors” who financially support new cannabis businesses—a policy change proposed by the governor earlier this year.
According to the Office of Fiscal Analysis, the state is positioned to save $12.5 million in the 2024 fiscal year by ending that angel investor credit. It’s estimated to save $15 million in each subsequent year through 2028.
“I am glad to sign a bill providing tax relief to our residents,” Lamont said in a press release. “By working together collaboratively, we are making Connecticut stronger and adopting policies that benefit the people who live here. I thank the legislative leaders on both sides of the aisle for their work on this biennial budget.”
Under the new law, licensed cannabis businesses in the state will be able to deduct “the amount of ordinary and necessary expenses that would be eligible to be claimed as a deduction for federal income purposes…but that are disallowed under Section 280E of the Internal Revenue Code because marijuana is a controlled substance under the federal Controlled Substance Act.”
The 280E fix is consistent with legislation that lawmakers in several states have pursued to provide relief for state marijuana markets, which face significantly higher effective tax rates under federal prohibition.
For example, Illinois lawmakers sent a budget bill to the governor last month that includes language similarly allowing state-licensed cannabis to take tax deductions that they’re barred from doing at the federal level under the IRS prohibition.
Also, the governor of New Jersey signed legislation last month to allow licensed marijuana businesses to deduct certain expenses on their state tax returns as a partial IRS 280E workaround. Lawmakers in Iowa, New York, Pennsylvania and Virginia have similarly pursued tax relief for each of their state’s marijuana markets.
The New York Senate passed a bill last week to provide a 280E fix for New York City cannabis companies at the local level because the already-enacted statewide reform didn’t affect the city’s separate tax law.
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Back in Connecticut, lawmakers have also sent separate marijuana omnibus legislation to the governor that contains a number of reforms, including the establishment of off-site event permits for marijuana retailers, restricting intoxicating hemp-derived products and creating a new Office of the Cannabis Ombudsman.
It would additionally establish a definition for edible cannabis products and revise the rules for the state’s lottery system for marijuana business licensing.
Meanwhile, Connecticut’s House of Representatives approved a bill last month to build on the state’s marijuana legalization and expungements law by requiring courts to reduce sentences or dismiss charges for a wider range of cannabis-related convictions and, accordingly, to release people who are currently incarcerated on those charges.
The House also passed a measure last month to bill to decriminalize possession of psilocybin mushrooms.
Neither of those bills were taken up by the Senate prior to the end of the legislative session last week, however.
Separately, Lamont announced in January that the state had cleared nearly 43,000 records for marijuana-related convictions. The legalization legislation that he signed into law in 2021 empowered the state government to facilitate mass cannabis conviction relief.
The state also launched a web portal in January that provides residents with information about the status of their cannabis records and also guides those with older eligible convictions that weren’t automatically erased through the process of petitioning the courts for relief.
Lamont has embraced the state’s adult-use market, which launched at the beginning of the year, saying that he’s optimistic that it will mitigate illicit sales.
He also joked that one of his concerns about the cannabis industry rollout would be finding a place in line at one of the dispensaries. He wasn’t being serious, but the governor previously didn’t rule out the idea of participating in the legal marketplace.
Connecticut recreational marijuana sales hit a record high in May, with purchases in the adult-use market exceeding those of medical cannabis for the first time since adult-use retailers opened in January, state data shows.
The post Connecticut Marijuana Industry Tax Breaks Signed Into Law By Governor appeared first on Marijuana Moment.
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