On Wednesday, an alternative version of a bill introduced by Sen. Denny Hoskins, R-Warrensburg, that would allow an income tax deduction for certain expenses related to operating a medical marijuana business was passed by the House Select Committee on Government Oversight. It is now going before the House Committee on Administrative Oversight.
Language in SB 807the “Right to Start Act” would provide legal medical marijuana businesses in the state with a way to deduct the same business expenses as other businesses in Missouri. Historically, marijuana businesses have been excluded from claiming the majority of expenses because these deductions are excluded from federal deduction due to a section of the common tax code called 280E. Section 280E allows a cannabis business to deduct expenses related to the cost of goods sold, but unlike traditional business deductions, Section 280E does not allow the deduction of selling, general, or administrative expenses.
“The following amounts shall be subtracted from the taxpayer’s adjusted federal gross income to the extent that they are included in the adjusted federal gross income: […] For taxpayers authorized to do business under Article XIV of the Missouri Constitution, the amount equal to any expense otherwise qualifying as a federal income tax deduction of 130, but which is disallowed under of 26 USC Section 280E, effective January 1, 2022, because cannabis is a controlled substance under federal law.
Section 280E prevents businesses from receiving deductions or credits while trading or trafficking in controlled substances prohibited by federal law, with marijuana’s federal status as a controlled substance, so businesses Marijuana companies were unable to receive these qualified deductions incurred while participating in Missouri’s legal marijuana business.
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 liability 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 a common practice for running a successful and profitable business. However, medical marijuana companies are currently not allowed these deductions, which significantly increases their taxes.
In 2021, Senator Andrew Koenig, R-Manchester, attached an amendment to SB226 (2021) that would have accomplished what SB 807 seeks to accomplish this year.
SB226 (2021) went through the legislature, but vetoed by Gov. Mike Parson, the veto was not related to the marijuana business tax change, but to language dealing with property tax credits.
The superseded version of the bill also contains language that would require the Department of Health and Senior Services to issue licenses to all qualified applicants.
“Notwithstanding any other provision of law, the Department of Health and Senior Citizen Services will issue medical marijuana licenses to applicants who meet the requirements of Article XIV of the Missouri Constitution, whether the number number of licenses granted exceeds or does not exceed the overall limit of licenses established by the department. ”
Currently, the Department issues licenses based on constitutional language that dictates a minimum number of licenses based on state population.