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AB-37 Personal income taxes: deductions: business expenses: commercial cannabis activity.(2019-2020)



SECTION 1.

 Section 17209 is added to the Revenue and Taxation Code, to read:

17209.
 (a) For each taxable year beginning on or after January 1, 2020, and before January 1, 2025, Section 280E of the Internal Revenue Code, relating to expenditures in connection with the illegal sale of drugs, shall not apply to the carrying on of any trade or business that is commercial cannabis activity by a licensee.
(b) For purposes of this section, “commercial cannabis activity” and “licensee” shall have the same meanings as set forth in Division 10 (commencing with Section 26000) of the Business and Professions Code.
(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.
SEC. 2.
 (a) It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to this act.
(b) With respect to Section 17209 of the Revenue and Taxation Code, as added by this act, the Legislature finds and declares as follows:
(1) The objectives of this act are as follows:
(A) To provide tax equity to the cannabis industry.
(B) To exempt commercial cannabis activity by a licensee from Section 280E of the Internal Revenue Code, relating to expenditures in connection with the illegal sale of drugs, in order to allow cannabis businesses to claim deductions available to other legal businesses in the state.
(C) To provide commercial cannabis licensees the ability to make ordinary business deductions from taxable income in the same manner that other state businesses do for state purposes.
(D) To align the Personal Income Tax Law with the Corporation Tax Law in relation to deductions under Section 280E of the Internal Revenue Code.
(2) The performance indicators related to this act are as follows:
(A) The number of deductions claimed pursuant to Section 17209 of the Revenue and Taxation Code.
(B) The total dollar amount of deductions claimed pursuant to Section 17209 of the Revenue and Taxation Code.
(3) The Franchise Tax Board shall have the following data collection and reporting requirements:
(A) Collect data on the number of deductions claimed pursuant to Section 17209 of the Revenue and Taxation Code.
(B) Collect data on the total dollar amount of deductions claimed pursuant to Section 17209 of the Revenue and Taxation Code.
SEC. 3.
 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.