UPDATED: New Jersey Governor Signs Legislation to Provide Tax Relief to Cannabis Industry

Editor's note: This story was updated at 3:30 p.m. ET on Tuesday, May 9, 2023, to reflect the legislation being signed into law by New Jersey Gov. Phil Murphy.

New Jersey Gov. Phil Murphy signed legislation into law May 8 that allows the state's licensed cannabis businesses to deduct certain expenses on their state tax returns.

A3946/S340 decouples state tax provisions from the federal prohibition on cannabis business deductions.

“We applaud Gov. Phil Murphy, Sen. Troy Singleton, Assemblywoman Annette Quijano and all New Jersey officials for their leadership in decoupling the onerous and outdated Section 280E from the tax code, eliminating a key barrier that has impeded entrepreneurship and the growth of the cannabis industry across the nation," James Leventis, Executive Vice President of Legal, Compliance & Government Affairs at Verano, a multistate operator with facilities in New Jersey, said in a public statement. "Above all, this decision opens the door for entrepreneurs, social equity groups and cannabis operators of all sizes to gain access to critical capital and leverage opportunities that will allow their businesses to grow and thrive."

New Jersey lawmakers approved the legislation Feb. 27, sending the proposal to Murphy for his signature.

The New Jersey Assembly passed A3946 in a 59-8 vote after the Senate approved it 32-3.

The legislation, sponsored by Assemblymember Annette Quijana, decouples state tax provisions from the federal prohibition on cannabis business deductions, which will ultimately allow businesses to deduct certain expenses on their state tax returns.

New Jersey voters approved adult-use cannabis legalization in the November 2020 election and commercial sales launched in April 2022.

Cannabis businesses in the state—and elsewhere across the country—are currently unable to deduct business expenses from their state and federal tax returns due to cannabis’s status as a Schedule I substance under the Controlled Substances Act.

Now that Murphy has signed A3946 into law, it will “apply to taxable years beginning on or after January 1 following enactment,” according to the bill’s text.

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