Why it matters: Illinois has passed a budget bill that includes provisions for the state’s cannabis industry, specifically allowing licensed businesses to make tax deductions. The Cannabis Regulation and Tax Act addresses issues arising from Section 280E, which bans tax deductions by cannabis companies. The provision applies to taxable years from Jan. 1, 2023 onwards. Illinois’s budget bill also creates a Cannabis Business Development Fund, aimed at helping social equity applicants secure low-interest rate loans to cover expenses like starting and operating a cannabis business.
What they are saying: The new budget bill has furthered Illinois’s attempts to use funding mechanisms to help the state’s legal cannabis industry grow and remain competitive. The measures will allow these businesses to become slightly more economically viable and sustainable, while also creating significant benefits for underrepresented groups working in the industry.
The big picture: Recent moves by several states show a clear desire to help legalize cannabis companies stay financially afloat by reducing tax burdens. Decoupling state tax provisions from federal prohibition on cannabis business deductions is currently being considered by several states, and successful implementation could lead to other states following suit.
What to watch: Funding provisions like the Cannabis Business Development Fund may well become more commonplace as other states seek to aid underfunded cannabis businesses and entrepreneurs. Illinois’s cues may also encourage other states to follow suit and pass their own tax relief measures, potentially furthering the growth of the cannabis industry.
My take: Providing licensed cannabis businesses with the ability to take tax deductions is a significant positive for a state that legalizes cannabis usage. Not only will it reduce the tax burden on these businesses, but it will also make the economic landscape more competitive and inclusive for everyone. I expect more states to follow Illinois’s lead in passing pro-cannabis legislation and focus on alleviating the tax burden on cannabis businesses.
