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AB-420 Personal income tax: deduction: commercial cannabis activity.(2017-2018)

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Date Published: 07/19/2017 09:00 PM
AB420:v97#DOCUMENT

Amended  IN  Senate  July 19, 2017
Amended  IN  Senate  June 13, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 420


Introduced by Assembly Members Wood, Bonta, Cooley, Dahle, Jones-Sawyer, and Lackey

February 09, 2017


An act to add Section 17209 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 420, as amended, Wood. Personal income tax: deduction: medical cannabis or marijuana commercial cannabis activity.
Existing law, the Medical Cannabis Regulation and Safety Act (MCRSA), authorizes a person who obtains both a state license under MCRSA and the applicable local license to engage in commercial medical cannabis activity pursuant to those licenses, as specified.Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA) that was added by the approval of Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial marijuana activity, which does not include medical cannabis activity, pursuant to that license and any applicable local ordinances. Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities and authorizes persons to conduct specified commercial cannabis activities, as defined, in the state.
The Personal Income Tax Law and the Corporation Tax Law allow various deductions in computing the income that is subject to the taxes imposed by those laws. The Personal Income Tax Law conforms as of a specified date to federal income tax laws with respect to itemized deductions, including business deductions and items not deductible, except as specifically provided. The Corporation Tax Law does not conform to those federal income tax provisions, but specifically provides for deductions for purposes of that law. The Personal Income Tax Law, by conformity to federal income tax laws, disallows a deduction or credit for business expenses of a trade or business whose activities consist of trafficking specified controlled substances, including marijuana.
This bill bill, for each taxable year beginning on and after January 1, 2018, would specifically provide in the Personal Income Tax Law for nonconformity to that federal law disallowing a deduction or credit for business expenses of a trade or business whose activities consist of trafficking specified controlled substances, only for commercial cannabis activity, as defined, commercial marijuana activity, as defined, or both, authorized under MAUCRSA, thus allowing deduction of business expenses for a cannabis or marijuana trade or business under the Personal Income Tax Law, as provided.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

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

17209.
 Section For each taxable year beginning on or after January 1, 2018, 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, as defined in subdivision (j) of Section 19300.5 of the Business and Professions Code, or commercial marijuana activity, as defined in subdivision (d) of Section 26001 of the Business and Professions Code, or both. Division 10 (commencing with Section 26000) of the Business and Professions Code.

SEC. 2.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.