With his Jan. 16 inauguration, New Jersey Governor Phil Murphy brings a bold new agenda headlined by a desire to legalize marijuana for recreational use. During his campaign, Murphy promised to make every effort to initiate legislation within his first 100 days; and he has already ordered a 60-day review of the medical marijuana industry since taking office. At present, eight states and the District of Columbia have green-lighted marijuana for recreational use. Vermont — which is not accounted for in that list — became the first state to pass a legalization bill through their legislative process in January and will make ten jurisdictions total.
What does all this mean for New Jersey? Legislation has already been introduced. Senate Bill No. 830, sponsored by Senator Nicholas Scutari (D, Union), was first introduced last year and then reintroduced recently. The bill would legalize possession and personal use of marijuana for persons over the age of 21. It would create a State Division of Marijuana Enforcement and provide a licensing framework for growers and retailers. An estimated 21 dispensaries would be permitted statewide under the plan. Other bills, like Assemblyman Reed Gusciora’s (D-Mercer), would enable people to grow cannabis at home, thus increasing the number of New Jerseyans who could obtain medical marijuana. And Senators Ronald Rice (D-Essex) and Robert Singer (R-Monmouth, Ocean) introduced legislation that would decriminalize possession of a small amount of marijuana.
With this proposed legislation, New Jersey CPAs may have many questions:
- Is it safe to take on clients who are engaging in the industry in states where it is legal?
- Will it be safe to take on clients in New Jersey once legalized? If so, will the ramifications of IRC §280E control the deductibility of expenses or will the State of New Jersey be lobbied to modify its tax rules to allow for new deductions not allowed on the federal level?
- Do accounting professionals and their firms need to take new steps to protect themselves from legal risk — such as to inform their liability insurance providers and their banks that they are accepting clients involved in the cannabis industry?
These questions and more have led the NJCPA to form the Cannabis Advisory Group, which seeks to monitor legislative updates and gauge their possible impact on the industry. We will periodically solicit feedback to help guide our focus, and have formed a Cannabis Interest Group. If the progression of this legislation interests you, or if you are considering accepting clients involved in the industry, join the Cannabis Interest Group to stay involved in the discussion.