Agriculture & Markets Law

New York Unveils Plan To Equitable Cannabis Marketplace

New York Unveils Plan To Equitable Cannabis Marketplace

Recently, the New York Cannabis Growers and Processors Association (NYCGPA) unveiled its 2022 legislative agenda. It contains a comprehensive plan that lays out the association’s legislative priorities as New York continues to establish its adult-use cannabis market. 

The NYCGPA is an industry association that represents farmers, processors, and other businesses in the marijuana sector. 

The association mainly emphasizes the significance of environmental sustainability, consumer-conscious practices, and community building. 

It is made up of cannabis growers and processors who joined forces to build a sector in New York that works for small and mid-sized cannabis businesses. Some of the critical issues that are in its 2022 legislative agenda include:

1. Prioritizing New York Cultivators

NYCGPA believes that the best way to achieve equity for small businesses based in New York is to give them an opportunity in the marketplace from the onset. When dispensaries commence their operations, there will be a high demand for products. 

The demand can be met with current hemp growers and social equity cultivators. Still, this is only if these applicants are given special priority and permitted to begin operations with ample lead time before the scheduled opening of dispensaries. 

Without such priorities, the demand would only be met by the ten medical cannabis registered organizations currently operating. This would create a situation that is contrary to the goals of the Marijuana Regulation and Taxation Act (MRTA). 

Additionally, to achieve the MRTA’s sustainability goals and encourage sun-grown production, permission has to be granted to cultivators before May 15 due to the unique daylight cycles and climate of New York.

2. Minimizing Tax Burden From 280E

Currently, plant-touching cannabis ventures are required by the IRS to pay income tax without deducting standard expenses apart from the documented Cost Of Goods Sold. This is due to federal prohibition. 

Ultimately, businesses end up paying up to 75% tax. NYCGPA supports the passage of S7518 that Senator Cooney introduced. It would separate the New York State and the federal tax code with respect to 280E.

According to Section 280E of the Internal Revenue Code, a business engaged in trafficking particular controlled substances, including marijuana, is barred from deducting typical business expenses. 

It was enacted in 1982, during the so-called war on drugs. However, the law has proven to impede the cannabis industry considering its growth in recent years. 

The move to exempt New York will allow cannabis businesses to have a more suitable way of achieving profitability besides enabling social equity entrepreneurs to build wealth. 

The proposed bill will allow marijuana businesses that are operating in New York to take ordinary and essential business expenses at the state level without the hindrance of 280E of the Internal Revenue code. 

The tax savings provided by the state will make a massive difference for marijuana businesses even without federal intervention. 

3. Removal Of THC-Based Excise Tax

If enacted, New York will be the first state to tax cannabis based on the THC level of a particular product. This novel yet highly flawed approach would increase the compliance burden on producers. 

Furthermore, it will also result in tax miscalculations that can reach the tune of millions of dollars. The ripple effect of the erroneous law will also create a negative price effect on products, which can hamper innovations, especially for consumables. 

Another disadvantage of creating a THC tax is it will promote falsehood in the sector, forcing laboratories to underreport THC levels on particular products. The new approach of taxing THC levels would likely create unnecessary risks and mainly impact small cannabis businesses. 

4. Defining Cannabis As An Agricultural Crop

Currently, the Agriculture & Markets Law provides numerous protections for farmers in relation to land use, zoning, and taxes. 

Considering that cannabis has started to play a pivotal role in New York’s agricultural sector, there’s a need to create similar protections to ensure long-term growth and success. 

The NYCGPA supports the inclusion of cannabis in the definition of an agricultural crop by supporting the amendment of subdivision 2 of section 301 of the Agriculture & Markets Law. 

Legislative reforms across different states have contributed to the growth of the cannabis market. The changes have created suitable conditions for cannabis businesses to operate. 

Due to the recreational marijuana reforms, dispensaries can now legally sell glass bongs and various smoking accessories.   

The inclusion of cannabis in New York’s 2023 budget tells of a bright future in the state. The new governor, Kathy Hochul, previously showed her support for the cannabis sector even before she took office. 

Therefore, we can expect to see significant growth in the industry. Support from the NYCGPA also helps to ensure necessary legislative reforms are instituted.   

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