New York Approves 52 Adult-Use Conditional Cultivation Licenses

Yesterday, the Cannabis Control Board approved 52 adult-use conditional cultivation licenses, which means the approved businesses can start growing cannabis for the upcoming adult-use market. Licensees can start growing cannabis outdoors or in a greenhouse with up to 20 artificial lights. The new licensees are all current hemp farmers that have grown and harvested for at least two of the past four years. An adult-use conditional cultivator license is valid for no more than two years, expiring at the latest on June 30, 2024. In order to continue cultivating cannabis upon the expiration of the adult-use conditional cultivator license, the conditional cultivator licensees must apply for an adult-use cultivator license and meet the requirements of that license. More approvals for adult-use conditional cultivation licenses are anticipated as the Office of Cannabis Management (OCM) and Cannabis Control Board (CCB) continue to review applications on a rolling basis. The deadline for applications is June 30, 2022.

Additionally, there have been other key developments in New York’s budding adult-use market in recent weeks, which include the following:

State 280E Tax Break

Last week, New York lawmakers and Governor Hochul passed the state’s budget, which includes a change to New York’s tax law that may help cannabis businesses see significant tax savings.  The provision allows cannabis businesses to take state tax deductions that are available to businesses in other industries despite an ongoing federal ban on cannabis. Championed by Sen. Jeremy Cooney, and Assemblywoman Donna Lupardo, the legislators estimate it will save cannabis businesses in the New York market over $25 million annually by 2024.

In the United States, cannabis businesses are precluded from making certain federal tax deductions under an Internal Revenue Code section known as 280E. This change to New York’s tax code allows cannabis businesses to make tax deductions for business expenses and claim certain credits at the state level that they are currently prohibited from utilizing on their federal returns due to federal prohibition.

Under 280E, businesses whose activities consist of “trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act)” cannot make deduct most business expenses from their federal taxes or receive tax credits, even though they are still obligated to pay taxes. The new law essentially decouples state tax code from the federal law in this respect, allowing significant tax savings for cannabis businesses at the state level.

Proposed Cannabis Banking Bill

Senator Cooney also filed the Cannabis Banking Disclosure Act this week aiming to improve efficiency and compliance in the cannabis banking industry. The Act would allow the OCM to share information about cannabis business applicants and licensees directly with financial institutions interested in providing services to cannabis businesses, assisting with Know Your Client and other banking reporting requirements.

Advisory Board

Under the Marijuana Regulation and Taxation Act (MRTA), the state is required to form a Cannabis Advisory Board consisting of 13 voting appointed members who would make recommendations for the state’s cannabis market and govern and administer the community reinvestment fund established to provide grants for qualified community-based nonprofit organizations and approved local government entities for the purpose of reinvesting in communities disproportionately affected by past federal and state drug policies. Until recently, there had been no publicly available information on the status of that board, however yesterday, Governor Hochul provided an update, telling NY Cannabis Insider that the Governor’s office is now working to make appointments to the Cannabis Advisory Board and the board will hold its first meeting next month.

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We will continue to closely monitor developments in connection with the MRTA’s rules and regulations. If you have questions regarding the contact of this alert or the MRTA generally, please contact me at [email protected], or another member of the Firm’s cannabis team.

Source:  https://www.cannabisandthelaw.com/2022/04/15/new-york-approves-52-adult-use-conditional-cultivation-licenses/?utm_source=feedburner&utm_medium=email

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