New York State’s budget, which passed on Saturday, more than a week late, includes legislative language with major implications for the state’s adult use cannabis industry, expected to take off before the end of 2022. The budget projects $1.25 billion in cannabis tax and fee revenue in the first five years of the program.
The language would allow this nascent industry the same business expense deductions that traditional businesses are allowed, starting January 1. The effort was led by Sen. Jeremy Cooney and Assemblymember Donna Lupardo, both of whom told Cannabis Wire last month that their leadership on the issue was meant to lift up the industry ahead of its launch.
Both the Senate and Assembly versions of the legislation amend state tax law so that an Internal Revenue Service tax code that prevents cannabis businesses from making typical deductions – because cannabis is federally illegal – “shall not apply” to state-licensed entities.
New York Assembly Majority Leader Crystal Peoples-Stokes and Sen. Liz Krueger, the two main sponsors of the Marihuana Regulation & Taxation Act (MRTA), New York’s adult use law, set the ambitious goal of allocating 50% of licenses to equity applicants.
“To achieve that objective we must ensure the cost of doing business does not prevent the social and economic equity candidates from actually participating in the emerging industry,” Cooney said in an announcement on Friday.
Cooney told Cannabis Wire in March that New York’s lawmakers and regulators are learning from states as large as California, as “dense” as Illinois, or smaller markets like Massachusetts, on these statewide cannabis tax measures.
Cooney, a Democrat who represents a district that includes a swath of the City of Rochester, said that he worked “directly” with California Assemblymember Reggie Jones-Sawyer, who worked on similar legislation in California, to “model” a bill that could work for New Yorkers.
“We wanted to get this done before we got too far down the pike in terms of getting the licenses out into the state, because we wanted to encourage people to actually put their business plans forward and apply for licensure,” Cooney said in March. “When they talk with their accountants as part of their application process, we want them to… be able to deduct these expenses on their state taxes.”
Cooney told Cannabis Wire that he had a window into the importance of equity as Krueger and Peoples-Stokes negotiated legalization with former Gov. Andrew Cuomo.
“Business expenses really became an equity issue for me because if I’m going to be out there talking about marijuana justice in general, and really talking about the goals of the MRTA, which is to then give the same communities and the same people – the same New Yorkers – who are most negatively disproportionately impacted by the war on drugs, now the opportunity to economically benefit, well, then we better darn well provide that real economic opportunity,” Cooney told Cannabis Wire.
Lupardo told Cannabis Wire last month that she was prompted to file the tax bill after attending a local event during which cannabis business owners told her about their difficulties with taxes. They mentioned the tax deduction bill that Cooney filed in December, though at the time, an Assembly version hadn’t yet been filed. So Lupardo moved.
Lupardo also said that it was “big” that the Business Council of New York supported the tax break.
Cannabis Wire spoke to Patrick Bailey, spokesperson for the Council, about the group’s interests in cannabis policies and their lobbying registrations.
“Our point is, whether it’s the cannabis industry or a pizza shop, if it’s such a legitimate business in New York State, they should all have equal opportunity and get the same benefits. That’s the one way to, no pun intended, grow economic development,” Bailey told Cannabis Wire.
The budget also includes a $200 million public-private equity fund that Gov. Kathy Hochul announced in January. Hochul’s budget briefing book also noted that “additionally OCM will create a State-run business incubator to further support equity applicants.”
Cannabis Wire first reported that the Dormitory Authority of the State of New York (DASNY), which focuses on “construction, financing, and allied services which serve the public good of New York State,” released a Request for Information in late February on the state’s cannabis equity fund.
And, the budget allocates $46 million toward the Office of Cannabis Management.