SACRAMENTO. Calif. (Jan. 17, 2018) – A bill filled in the California Assembly would sever a link between state and federal tax law, allowing individuals to deduct expenses from legal marijuana businesses for state income tax purposes. Passage of the bill would encourage the growth of the legal marijuana market in California and further nullify unconstitutional federal prohibition of cannabis in practice.
Asm. Reginald Jones-Sawyer (D-Los Angeles) introduced Assembly Bill 1863 (AB1683) on Jan. 11. Under current California law, the state personal income tax code conforms to federal tax law with respect to itemized deductions and business deductions. Under the federal tax code, individuals cannot deduct business expenses related to trafficking specified controlled substances, including marijuana. As a result, marijuana business owners cannot currently deduct business expenses from their state income taxes. Under AB1683, the IRS code relating to expenditures in connection with the illegal sale of drugs would no longer apply to the carrying on of any trade or business that is commercial cannabis activity under California law.
In November 2016, voters in California approved a ballot measure legalizing marijuana for general use by adults and the law went into effect on Jan. 1. Passage …
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