Tax

New Jersey Legislators Pass Adult Use Recreational Cannabis Bill

/ Alexander Banzhaf

In a significant step towards the legalization of recreational cannabis in the Garden State, the New Jersey state Assembly and Senate passed Bill S21 on Thursday, making New Jersey poised to become just the fourth state on the east coast to legalize recreational cannabis. The Bill establishes the proposed framework of the industry and is now awaiting the signature of Gov. Murphy.

Earlier this fall, voters overwhelmingly approved a constitutional amendment to legalize cannabis in New Jersey after the New Jersey legislature was unable to pass an earlier draft of the Bill.

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Early Cannabis Trends in 2019

/ Alexander Banzhaf

With the new year in full swing, New Jersey Cannabis Counsel highlights some of the most impactful news relevant to the potential legalization of cannabis in New Jersey.

New Attorney General Uninterested in Legal Cannabis Businesses?

Photo of William Barr

United States Attorney General Nominee William Barr

New Attorney General nominee William Barr testified at his confirmation hearing that he does not intend to pursue cannabis businesses operating legally pursuant to state regulations.  This is an about-face from former Attorney General Sessions, who rescinded the Cole Memorandum, which was the Obama era policy document that effectively told the Department of Justice to only pursue legal cannabis businesses that were linked to cartels, children or trafficking cannabis to states where it is not legal.  Mr. Barr has also called for additional cannabis cultivation for research purposes, and understands that the new bill legalizing the growth of hemp has implication for cannabis.  Mr. Barr has not formally committed to preparing a revised Cole Memorandum, but if confirmed, Mr. Barr as Attorney General would be a potential boon for the cannabis industry.

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Proposed Amendment to §280(E)

/ Alexander Banzhaf

§280(E) of the Internal Revenue Code poses one of the more frustrating challenges for the legal marijuana industry. §280(E) states:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consist of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or any State in which such trade or business is conducted.

The impact of §280(E) is that marijuana businesses, even those that are in complete compliance with State regulations and laws, are not allowed to avail themselves of typical business tax deductions or credits.  This means that while many legal marijuana businesses generate high revenues, high profits do not often follow after the taxman takes his share.

Picture of tax forms on a desk.
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