New York 2023 Budget Includes Tax Break For Cannabis

New York State Governor Kathy Hochul released the 2023 budget that predicts adult-use sales of legal cannabis will generate $40 million in license fees and $16 million in partial receipts from the state’s retail taxes. The governor’s budget said this would offset the decrease in cigarette consumption taxes. These figures are projected to increase when the fiscal year 2024 is expected to be the first full year for sales.

School Funds

No cannabis revenue is expected to help schools in 2023, but it is expected to generate some money for the school fund in 2024. $9 million is projected to help schools in the fiscal year 2024, with that number rising to $21 million in 2025 and $81 million in 2027. Revenue funds from adult-use cannabis are projected at $56 million in 2023 and rising to $339 million by 2027.

Tax Break

The budget also included a tax break for cannabis companies. Along with numerous other industries that receive tax credits like theatrical and music productions, the language states,

Provides a tax deduction for the amount of any federal deduction disallowed pursuant to section 280E of the internal revenue code related to the production and distribution of adult-use cannabis products

That’s a big bonus for cannabis companies that currently can’t take the normal 280E business deduction. These deductions allow companies to increase their profits by writing off normal business expenses. So, while the product may face high taxation at the retail level, businesses could begin to even those costs out. This is a substantial benefit to some of the large companies that plan to sell adult-use cannabis in the state like Curaleaf (OTC: CURLF) and Green Thumb Industries (OTC: GTBIF). However, the OCM recently stated that it was giving first priority for licenses to persons who had experienced justice inequality when it came to cannabis possession.

The New York Cannabis Control Board has a meeting scheduled for April 14. It will be a virtual meeting and the agenda has not been posted as of yet.

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