Bill that would allow Missouri’s legal marijuana businesses to take tax deductions advances
On Wednesday, a substituted version of a bill introduced by Senator Denny Hoskins, R-Warrensburg, that would authorize an income tax deduction for certain expenses related to operating a medical marijuana business passed the House Special Committee on Government Oversight. It now moves forward to the House Committee on Administrative Oversight.
Language in SB 807, the “Right-to-Start Act” would provide legal medical marijuana businesses in the state an avenue to deduct the same business expenses as other Missouri businesses. Historically, marijuana businesses have been excluded from claiming a majority of expenses as those deductions are disqualified from federal deduction due to a section of tax code common referred to as 280E. Section 280E allows a cannabis business to deduct expenses related to the cost of goods sold, but unlike traditional business deductions, 280E doesn’t allow for the deduction of selling, general, or administrative expenses.
“There shall be subtracted from the taxpayer’s federal adjusted gross income the following amounts to the extent included in federal adjusted gross income: […] For taxpayers authorized to do business pursuant to Article XIV of the Missouri Constitution, the amount equal to any expenditure otherwise allowable as a 130 federal income tax deduction, but that is disallowed pursuant to 26 U.S.C. Section 280E, as in effect on January 1, 2022, because cannabis is a controlled substance under federal law.”
Section 280E restricts businesses from receiving deductions or credits during the trade or business of trafficking in controlled substances prohibited by federal law, with marijuana’s status federally as a controlled substance, thus Missouri’s marijuana businesses have been unable to receive those qualified deductions incurred during their participation Missouri’s legal marijuana trade.
SB 807 would mean a significant change for Missouri’s medical marijuana businesses. With its passage, the newly qualified deductions could mean a six-figure change in tax liabilities for some Missouri operators.
SB 807 is a reintroduction of a bill originally introduced by Hoskins in 2021, “According to our Constitution, Missouri recognizes medical marijuana as a legal and legitimate business,” Hoskins told Greenway at the time. “Deducting business expenses is routine practice for operating a successful, profitable business. However, medical marijuana businesses aren’t currently allowed these deductions, which in effect increases their taxes significantly.”
In 2021, Sen. Andrew Koenig, R-Manchester, attached an amendment to SB226 (2021) that would have accomplished what SB 807 seeks to accomplish this year.
SB226 (2021) passed through the legislature, but was vetoed by Gov. Mike Parson, the veto was not related to the marijuana business tax amendment, but to language addressing property tax credits.
The substituted version of the bill also contains language that would require the Department of Health and Senior Services to issue licenses to all qualifying applicants.
“Notwithstanding any other provision of law, the department of health and senior services shall issue medical marijuana licenses to applicants who qualify under Article XIV of the Constitution of Missouri regardless of whether the number of licenses granted exceeds the aggregate license limit established by the department.”
Currently, the Department has issued licenses based on constitutional language that dictates a minimum number of licenses based on the state’s population.
