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South Carolina Cannabis & Hemp Industries 

IRC § 280E Analysis / R&D Tax Credit Eligibility
  • Does Section 280E Apply to state individual income tax?

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

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

    • No​, subject to further 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 South Carolina R&D Credit Summary​

State Law Background

(1) Hemp State Law Authority & Background​ 

  • S.C. Code Ann. § 46-55-10 to 46-55-40 (Law. Co-op 2016)

    • Allows hemp growth for commercial and research purposes.

  • On March 28, 2019, South Carolina Gov. Henry McMaster signed into law a bill that expanded the state’s hemp farming program. House Bill H3449 permits people to cultivate, handle, or process hemp if they are eligible to do so and receive approval from the South Carolina Department of Agriculture.​ The hemp program, administered by the South Carolina Department of Agriculture, and set forth by state law previously only allowed for 40 permits for up to 40 acres each to be issued in 2019. 

    • Under the new state law, anyone who previously applied for a grower permit for 2019 will now be eligible to grow hemp in South Carolina, so long as they successfully pass a federal and state background check (“No person who has been convicted of a felony relating to a controlled substance under state or federal law during a ten-year period from the date of his conviction shall be eligible to obtain a license to cultivate, handle, or process hemp”) and have accurately provided: full name, address, GPS Coordinates of where hemp is being grown and a signed letter of intent with a purchaser.

    • The new law also removes the cap on acreage and allows permitted growers to grow an unlimited number of acres.

    • See References:

(2) Medical Marijuana State Law Authority & Background - Limited Access Marijuana Product Laws (low THC/high CBD- cannabidiol)

  • Statutory Language (year) - SB 1035 (2014) Medical Cannabis Therapeutic Treatment Act- Julian's Law

    • Patient Registry or ID cards - Yes

    • Allows Dispensaries – (1) Must use CBD product from an approved source; and (2) approved by the United States Food and Drug Administration to be used for treatment of a condition specified in an investigational new drug application. The principal investigator and any subinvestigator may receive cannabidiol directly from an approved source or authorized distributor for an approved source for use in the expanded access clinical trials. Some have interpreted the law to allow patients and caregivers to produce their own products.

    • Specifies Conditions - Lennox-Gastaut Syndrome, Dravet Syndrome, also known as severe myoclonic epilepsy of infancy, or any other form of refractory epilepsy that is not adequately treated by traditional medical therapies.

    • Recognizes Patients from other states - No

    • State Allows for Retail Sales/Adult Use - Cannabidiol or derivative of marijuana that contains 0.9% THC and over 15% CBD, or least 98 percent cannabidiol (CBD) and not more than 0.90% tetrahydrocannabinol (THC) by volume that has been extracted from marijuana or synthesized in a laboratory

    • Pending medical marijuana legislation, see 2019-2020 Bill 366: SC Compassionate Care Act

  • Are sales of medical marijuana subject to sales tax?

  • Is medical marijuana subject to an excise tax?

(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 South Carolina Marijuana and Controlled Substances Tax imposes a tax on marijuana illegally possessed by dealers. A dealer means a person who illegally manufactures, produces, ships, transports, or imports into South Carolina or in any manner acquires or possess more than 42.5 grams of marijuana. See S.C. Code Ann. § 12-21-5020(3). The tax rate is $3.50 per gram or portion of a gram of marijuana. Official stamps, labels or other indicia to be affixed to all marijuana must be purchased from the Department. See S.C. Code. Ann. § 12-21-5010.

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