California governor vetoes state tax deduction bill for cannabis businesses

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California Gov. Jerry Brown vetoed a bill that would have given a tax break to all licensed marijuana businesses, dealing a setback to MJ companies hoping to reduce their state tax bills.

The measure – Assembly Bill 1863, approved by the Legislature earlier this summer – would have allowed licensed cannabis companies to take tax deductions under the state Personal Income Tax Law. If Brown had signed the measure into law, it would have gone into effect for the 2018 tax year.

The bill came with an estimated price tag to the state of $13 million per $1 billion in retail cannabis sales, according to an analysis by the state Senate Appropriations Committee.

“Given the cost to the General Fund, this proposal is best evaluated as part of the budget process,” the governor wrote in his veto message Wednesday.

The veto is likely to be met with dismay by California marijuana businesses, which already are struggling to make ends meet given the cost of complying with new state regulations and high local taxes. They also face a federal tax burden under 280E that typically results in MJ companies paying a federal tax rate of 70%-90%.