MA Votes to Decouple from Federal 280E

Posted on May 25, 2022May 25, 2022

On May 18, 2022, in a 153-2 vote, the Massachusetts House of Representatives approved sweeping marijuana reforms, which includes two welcomed provisions for operators!

MA House Votes to Decouple from Federal 280E Tax Code

The House voted to amend the state’s tax code to officially decouple from the federal tax code with respect to 280E. This would allow state legal cannabis operators to deduct their ordinary and necessary business expenses on their annual state income tax returns, a right they have been denied since the state first legalized medical marijuana back in 2012.

The State Senate approved its version of a similar bill back in April. Now that the House bill has been approved, both the Senate and House bills will go through the conference committee process to reconcile any differences, which will be followed with another round of votes before being sent to the Governor for signature.

AAFCPAs’ Cannabis Practice sees this as a significant step forward in normalizing the cannabis industry within the state while the country waits for meaningful cannabis reform at the federal level.

Social Equity Fund Increased

The House voted to increase the proportion of the revenue generated from the state’s 10.75% marijuana excise tax that gets allocated to a social equity fund from 15% (proposed in an earlier bill) to 20%. This fund would be used to assist social equity applicants get their cannabis businesses off the ground.

AAFCPAs is a full-service CPA and consulting firm that serves the cannabis industry nationally. We continue to monitor ever-changing developments in federal legalization, banking reform, and state and local taxation. If you have questions, please contact: David J. Gravel, CPA at 774.512.4008, dgravel@nullaafcpa.com; David McManus, CPA, CGMA at 774.512.4013, dmcmanus@nullaafcpa.com; or your AAFCPAs Partner.

About the Authors

David J. Gravel, CPA

Dave is a leader in AAFCPAs’ cannabis practice. He provides tax and consulting solutions to multi-state operators, recreational and medical retailers, cultivators, product manufacturers, and investors. He has extensive experience advising cannabis operators and license applicants on optimal entity structure, maximizing deductions in accordance with IRC Section 280E, and multi-year tax planning to ensure preferred tax results, with a focus on preserving cash and maximizing lender/investor value. He also provides guidance on avoiding pitfalls associated with 280E and state and local tax compliance. He helps clients understand the critical role of cost accounting in the cannabis space, and what is scrutinized by those evaluating your statements. He provides insight on documentation needed and what to expect to support an IRS or other external audit.

David McManus, CPA, CGMA

Dave leads AAFCPAs’ Cannabis Business Practice, providing highly coveted tax, entity structure, and business advisory solutions. Dave has been deeply immersed in understanding the complex financial and operational nuances of the cannabis industry since 2012. He advises multi-state operators, recreational and medical retailers, cultivators, product manufacturers, and investors. He proactively advises clients on risks, opportunities, and tax implications related to market entry, accounting methods, capital structure, debt financing, R&D, M&A, and goodwill impairment. He has led industry training sessions on interpreting and implementing new federal and state marijuana statutes, including compliance with 280E. Dave maintains a strong network of cannabis industry investors, attorneys, bankers, employee compensation and benefits providers, realtors, risk managers, and insurance agents, and he leverages these resources as appropriate to help clients achieve success.