What Tax Credits Does California Provide to Cannabis Businesses?

Cannabis Businesses

California cannabis business owners face a challenging environment when it comes to understanding the tax credits and other financial incentives available to them. Many of the state’s regulations surrounding taxation are complex and hard to decipher, leaving business owners feeling overwhelmed and confused. Compounding these difficulties is the fact that cannabis businesses, even those operating in compliance with existing regulations, are still viewed by the federal government as illicit.

In 2022, California established two new tax credits to help incentivize and support businesses in the cannabis industry. The challenge lies in navigating the complexity of paperwork associated with accessing these credits. That’s where the legal team of Purdy & Bailey, LLP can help. Our experienced attorneys are familiar with California tax regulations and have in-depth knowledge about cannabis businesses operating within the state.

High-Road Cannabis Tax Credit

The first credit is the High-Road Cannabis Tax Credit (HRCTC), which is available for taxable years from January 1, 2023 through December 31, 2027. Cannabis business may claim 25% of the qualified expenditures or up to $250,000 in that tax year. Licensed cannabis retailers and microbusinesses can claim the HRCTC for qualified expenditures, including:

  • Employment compensation for full-time employees paid no less than 150% but no more than 350% of minimum wage
  • Safety-related equipment, training, and services
  • Workforce development for employees

In order to qualify for the tax credit, cannabis businesses must provide their full-time employees with compensation, employer-provided health insurance, and employer-provided retirement or pension benefits.

Cannabis Equity Tax Credit

California also offers the Cannabis Equity Tax Credit (CETC) to qualified cannabis businesses for the taxable years of 2023-2027. In order to qualify for the $10,000 credit, the business must have received approval for a fee waiver and deferral program by the Department of Cannabis Control.

The Purdy & Bailey, LLP Legal Team is Ready to Help!

The attorneys at Purdy & Bailey, LLP are dedicated to helping cannabis businesses navigate the complexity associated with California tax credits and other financial incentives. Our experienced legal team will work with you every step of the way to ensure that you get the most out of your state-provided financial benefits. We make it our business to stay up-to-date with the latest developments in the cannabis legal landscape so that we can provide current and competent legal guidance to our clients.

Contact us online or call us at (858) 360-7080 for more information about how we can help make taxation a less stressful part of running your cannabis business. 

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