Pennsylvania Bill Allows for Deduction of Cannabis Business Expenses

Senator Daylin Leach, a Democrat in Pennsylvania’s State Senate, introduced a bill that would allow persons to deduct business expenses associated with medical cannabis businesses. Pennsylvania enacted a medical cannabis program in 2016. In April, the state reported over 780,000 dispensing events with 2.2 million products sold.

Current state law cross-references the Internal Revenue Code Section 280(e), which prohibits a person from deducting business expenses associated with illegal drug sales. Senator Leach stated that Pennsylvania cannabis businesses should be allowed to deduct these expenses as the industry is legal and they produce jobs in the state. The legislation would remove the references to federal laws and permit the business deduction for state tax purposes.

During the 2019 legislative session, California enacted a law that permits individuals to deduct cannabis business expenses from personal tax liabilities under the California Tax Code. Governor Brown vetoed the bill in the 2018 legislative session due to the fiscal impact on the state, which was estimated to be tens of millions of dollars a year.