On January 1, 2020 AB37 went into effect in California. It allows legal cannabis companies to essentially be treated like other businesses – for tax purposes and only with the Franchise Tax Board. Since businesses will still have to file federal tax returns and pay taxes to the US Treasury, the law essentially requires two completely different tax filings. And the new rules are only in effect until 2025.
Section 280E has largely been seen as punitive to the cannabis industry, putting it in the same category with mobsters and the illegal drug trade.
There have been challenges to 280E in US tax court but thus far none have been successful. The industry continues to fight the law and hopes for an eventual constitutional challenge.
|Learn more in this article on the status of Section 280E and how California has passed Law AB37 to override the provision.