Tax Practitioners’ Meeting includes Section 280E cannabis deduction
The Illinois Department of Revenue (IDOR) today hosted the 2023 Tax Practitioners’ Meeting and PowerPoint presentation. The presentation included one significant cannabis tax item, the business expense deduction for licensed Illinois cannabis businesses.
The new Section 280E tax law amendment was included in the State’s budge, HB3817, which passed June 7. When the new law becomes effective for tax years beginning on or after Jan. 1, 2023, Cannabis industry businesses will be able to deduct business expenses that otherwise cannot be deducted federally pursuant to Section 280E of the Internal Revenue Code. The new law allows for the uncoupling for “state tax deductions” for any cannabis establishment operating in this State and licensed under the Cannabis Regulation and Tax Act or any cannabis cultivation center or medical cannabis dispensing organization operating in this State and licensed under the Compassionate Use of Medical Cannabis Program Act.
The “state tax deductions” item states, “Section 280E of the Internal Revenue Code for state tax deductions for years beginning on or after January 1, 2023, for any cannabis establishment operating in this State and licensed under the Cannabis Regulation and Tax Act or any cannabis cultivation center or medical cannabis dispensing organization operating in this State and licensed under the Compassionate Use of Medical Cannabis Program Act, an amount equal to the deductions that were disallowed under Section 280E of the Internal Revenue Code for the taxable year and that would not be added back under this subsection. The provisions of this subparagraph (JJ) are exempt from the provisions of Section 250.”
Along with Section 280E, the PowerPoint presentation highlighted an “Illinois’ Cannabis Tax Receipts” page. IDOR listed the cannabis tax totals from the beginning of legalization in Illinois to October 2023 at $1,426,879,997. In 2022, Illinois took in $450,463,952. Taxes are collected from the cultivator tax, dispensary tax (% THC), state sales tax, local sales tax, municipal cannabis tax, and county cannabis tax. In comparison, non-IDOR revenue net state taxes included $344 million for Casinos, $833 million for the Illinois Lottery, $895 million for Video Gaming Terminals, and $153 million for Sports Betting.
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