Iowa Cannabis & Hemp Industries
IRC § 280E Analysis / R&D Tax Credit Eligibility
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Does Section 280E Apply to state individual income tax?
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Yes. Iowa conforms the Internal Revenue Code. The starting point is Federal Adjusted Gross Income. There is no provision that states Section 280E does not apply.
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Does Section 280E apply to state corporate income tax?
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Yes. Iowa conforms to the Internal Revenue Code. The starting point is Federal taxable income. There is no provision that states Section 280E does not apply.
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Are State R&D Tax Credits Potentially Eligible for "Plant Touching" (e.g. producers, cultivators, manufacturers, retailers) Cannabis Companies?
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No, subject to 280E restrictions.
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Are State R&D Tax Credits Potentially Eligible for Industrial Hemp Companies & "Non-Plant Touching" Separate Trade or Businesses (e.g. testing laboratories)?
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Yes, subject to further 280E analysis regarding company activities, structure, and applicable state laws.
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State Law Background
(1) Hemp State Law Authority & Background - N/A
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Iowa SF 599 (2019) / Iowa Code § 204.1 to 204.17
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Directs the Department of Agriculture and Land Stewardship to establish a program, including licensing, fees and annual inspections, and to submit a state plan to USDA.
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Provides for the enforcement, fees and penalties.
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(2) Medical Marijuana State Law Authority & Background - Limited Access Marijuana Product Laws (low THC/high CBD- cannabidiol)
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Statutory Language (year) - SF 2360, Medical Cannabidiol Act of 2014 (Effective 7/1/14 and repealed in 2017 and replaced) HF 524 of 2017 now Section 124E
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Patient Registry or ID cards - Yes
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Allows Dispensaries - Yes
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Specifies Conditions - Yes
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Recognizes Patients from other states - Yes, for possession or use only, not for purchasing CBD in Iowa.
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State Allows for Retail Sales/Adult Use - Less than 3 percent THC
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Are sales of medical marijuana subject to sales tax?
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Uncertain. While the Medical Cannabidiol Act legalizes limited use of medical cannabis, it is unclear how, or if, Iowa will tax sales of such cannabis.
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Is medical marijuana subject to an excise tax?
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Uncertain.
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(3) Recreational Marijuana State Law Authority & Background - N/A
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Are sales of recreational marijuana subject to sales tax?
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N/A.
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Is recreational marijuana subject to an excise tax?
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N/A.
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(4) Does the State impose a Stamp Tax or Controlled Substances Tax?
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Yes. Iowa imposes a Drug Stamp Tax on any person acting as a dealer in certain controlled substances, which include marijuana. A person is a dealer if he or she unlawfully acquires, possesses, purchases, imports or manufactures 42.5 grams or more of marijuana or one or more unprocessed marijuana plants at any stage of growth. See Iowa Code Sec. 453B.1(3)(a); Iowa Code Sec. 453B.1(10).
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The tax rate is $5 on each gram or portion thereof of processed marijuana and $750 on each unprocessed marijuana plant.
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A dealer subject to the tax must purchase stamps, labels or other official indicia from the Department of Revenue and affix them to the controlled substance to indicate payment of the tax.
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For reference: Iowa's Drug Stamp Act.