The Maine Legislature passed a bill, LD 1063, to amend Maine's tax laws for Adult Use cannabis companies. Current federal tax laws under IRC §280E disallows federal tax deductions related to the illegal sale of drugs. This code section prohibits the deduction of most cannabis business expenses, resulting in cannabis companies paying much higher effective tax rates than other businesses. Historically, Maine's tax laws have mirrored the federal approach, disallowing state tax deductions for Adult Use cannabis businesses. Maine's tax laws have allowed Maine's medical cannabis licensees to deduct business expenses, while disallowing Maine's Adult Use cannabis businesses from capitalizing on these same business deductions. LD 1063 amends the State's tax laws to allow Maine Adult Use cannabis businesses to deduct business expenses from their state taxable income. With this change, all Maine cannabis licensees are now treated equally from a state tax standpoint.
For taxable years beginning on or after January 1, 2023, Maine's Adult Use cannabis businesses will now be able to take advantage of state tax savings by deducting business expenses which were previously disallowed. Although federal tax laws remain unchanged at this time regarding cannabis businesses, the change to Maine's tax laws will provide Maine Adult Use cannabis licensees with the ability to deduct business expenses just as Maine's medical cannabis licensees have had previously. The ability to deduct business expenses should provide significant state tax savings for these companies.
If you have any questions about this change, please consult with your cannabis tax attorney and CPA.
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Nick McCrillis is a registered patent attorney admitted to the US Patent and Trademark Office and the United States Tax Court. He advises and assists the firm's clients in a variety of industries on various intellectual property matters throughout the United States. In addition, Mr. McCrillis advises and represents the firm's clients throughout Maine's Medical and Adult Use cannabis programs on state and federal related tax matters and cannabis banking laws. Learn more about Nick McCrillis by clicking here.
Caseiro Burke is a boutique law firm that specializes in intellectual property law and cannabis compliance and licensing in the State of Maine. We offer clients creative, cost-effective and reliable legal solutions in all intellectual property and Maine cannabis law matters.