Illinois lawmakers have approved a bill that would allow marijuana businesses to claim state tax deductions as a partial fix to the federal tax code known as IRS 280E. This code prohibits businesses that sell Schedule I or II controlled substances, including marijuana, from deducting normal business expenses from their federal taxes. This means that marijuana businesses are subject to a much higher tax rate than other businesses, which can make it difficult for them to compete in the market.
The new bill, which was passed by the Illinois House of Representatives and Senate, would allow marijuana businesses to claim state tax deductions for expenses such as rent, utilities, and employee salaries. This would help to reduce the overall tax burden on these businesses and make it easier for them to operate in the state. The bill is seen as a partial fix to the larger issue of IRS 280E, which has been a major challenge for the marijuana industry since its inception.
While some states have attempted to address the issue through their own tax codes, the federal government has yet to make any significant changes to the law. Despite the challenges posed by IRS 280E, the marijuana industry has continued to grow and expand in recent years. In Illinois, the industry has seen significant growth since the state legalized recreational marijuana in 2020. However, many businesses still struggle to compete with other industries due to the high tax rates they face. The passage of this bill is seen as a positive step for the industry, as it will help to level the playing field and make it easier for businesses to operate in the state.
However, it is important to note that this is only a partial fix to the larger issue of IRS 280E. Until the federal government takes action to address this issue, marijuana businesses will continue to face significant challenges when it comes to taxes. Overall, the passage of this bill is a positive development for the marijuana industry in Illinois. It will help to reduce the tax burden on businesses and make it easier for them to compete in the market. However, it is important to remember that this is only a small step towards addressing the larger issue of IRS 280E. Until the federal government takes action to address this issue, the industry will continue to face significant challenges when it comes to taxes.
