AndreTaxCo, PLLC

Connecticut Cannabis & Hemp Industries 

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IRC § 280E Analysis / R&D Tax Credit Eligibility

• Does Section 280E Apply to state individual income tax?

  • Yes. Connecticut personal income tax conforms to the Internal Revenue Code. The starting point is Federal Adjusted Gross Income. There is no provision that states Section 280E does not apply.

• Does Section 280E apply to state corporate income tax?

  • Yes. Connecticut corporate income tax starts with Federal taxable income as reported on line 28. There is no provision that states Section 280E does not apply. 

• Are State R&D Tax Credits Potentially Eligible for "Plant Touching" (e.g. producers, cultivators, manufacturers, retailers) Cannabis Companies?

  • No, subject to 280E restrictions.  

• Are State R&D Tax Credits Potentially Eligible for Industrial Hemp Companies & "Non-Plant Touching" Separate Trade or Businesses (e.g. testing laboratories)?

  • Yes​, subject to further 280E analysis regarding company activities, structure, and applicable state laws.

• See Connecticut R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​

• Conn. Gen. Stat. § 21a-240 (Also, see 2014 Conn. Acts, P.A. #14-191.)

  • Establishes an agricultural pilot program for hemp research and directs the Connecticut Department of Agriculture to prepare a state plan.

  • Requires licenses for the cultivation and processing of hemp.

 

(2) Medical Marijuana State Law Authority & Background

• Statutory Language (year) - HB 5389 (2012)

  • Patient Registry or ID cards - Yes

  • Allows Dispensaries - Yes

  • Specifies Conditions - Yes

  • Recognizes Patients from other states - N/A

  • State Allows for Retail Sales/Adult Use - N/A

• Are sales of medical marijuana subject to sales tax?

  • Yes. Sales of medical marijuana by licensed dispensaries are subject to sales and use taxes. The prescription medicine exemption does not apply.

  • For reference: Connecticut Department of Revenue Guidance

• Is medical marijuana subject to an excise tax?

  • No.

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(3) Recreational Marijuana State Law Authority & Background​​​ - N/A

• Are sales of recreational marijuana subject to sales tax?

  • N/A

• Is recreational marijuana subject to an excise tax?

  • N/A

(4) Does the State impose a Stamp Tax or Controlled Substances Tax?

• Yes. The Marijuana and Controlled Substances Tax imposes a tax at the rate of $3.50 per gram of marijuana purchased, acquired, transported or imported into the state is imposed. All illicit drugs must have Connecticut tax stamps permanently affixed. The Marijuana and Controlled Substances Tax does not apply to persons in lawful possession of medical marijuana. Qualifying patients, physicians, primary caregivers, producers and dispensaries are considered to be in lawful possession of marijuana, and therefore, are not subject to the tax.

• For reference: Connecticut Marijuana and Controlled Substance Tax FAQ