IL Governor Tired of Waiting; Passes State Level 280E Tax Codes for Marijuana Businesses

karen roach /
karen roach /

For years now, marijuana businesses have been clamoring for the ability to use the tax laws to assist them the same way other businesses do. The way tax codes have been written at the federal level (and the state as well), these businesses have not been allowed to take the deductions that 280E would provide them. Now, Gov JB Pritzker (D-IL) has signed off on legislation welcoming these changes to IL.

Included in the language is the funding of a cannabis development fund as well as the extension of the deadline for conditional licenses to find their storefronts. At the heart of this legislature is the decoupling of the marijuana business from federal tax policy and giving them back the tax dedications they would normally have access to.

As 280E reads, “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) consists 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 the law of any State in which such trade or business is conducted.”

In essence, this means marijuana companies in IL can now take off the federal deductions they would receive if not a Schedule 1 business. Things like supplies, mileage, water, nutrients, etc could become tax write-offs. Given how much these pieces contribute to the costs of doing business, this could represent a massive change in their profit and loss statements at the end of the year.

They also are not alone. CT, NJ, NY, PA, and VA have all enacted their version of this workaround. Tired of seeing states do this on their own, Rep. Earl Blumenauer (D-OR) brought back a bill that would change the IRS coding and make these provisions a thing on the federal level.