In a significant move for the cannabis industry in New York City, Governor Kathy Hochul signed a bill on November 20, 2023, that permits deduction of business expenses incurred by cannabis businesses with respect to their city income tax liabilities. The bill can be seen as another step towards normalizing the cannabis industry within the city, as it now places cannabis businesses on equal footing with other industries in terms of their taxable income calculation.
The bill, announced by Rivkin Radler LLP, states that cannabis firms will now be able to deduct expenses paid or incurred in conducting their business to determine their city income tax obligations. This decision follows New York City’s endeavor to regulate and integrate the cannabis industry into its economic fold, as the city and state have both been gradually introducing more permissive cannabis regulation over the years.
The consequences of this bill likely extend beyond direct tax implications for cannabis businesses within the city. It serves as a legitimation of sorts, further normalizing the cannabis trade and potentially attracting cautious investors or entrepreneurs who may have been wary of the industry’s hitherto uncertain legal framework.
As cannabis laws continue to ever-evolve across the United States, and as tax regulations become a significant part of these changes, it will be critical to keep an eye on the potential ripple effects such measures could have for related industries.