California's cannabis industry has been rapidly growing since the legalization of adult-use marijuana in 2018. However, the industry has been facing issues of equity and access, particularly for individuals from communities that have been disproportionately affected by the War on Drugs. To address these issues, California has introduced the Cannabis Equity Tax Credit (CETC).

What is the Cannabis Equity Tax Credit (CETC)?

The CETC is a state tax credit available for qualified cannabis businesses that have received approval for the fee waiver and deferral program administered by the California Department of Cannabis Control (DCC). The CETC aims to provide financial assistance to these businesses and promote equity and access in the cannabis industry.

Qualified taxpayers may receive a nonrefundable tax credit of $10,000. The credit can be claimed for taxable years beginning January 1, 2023 through December 31, 2027.

Who is a Qualified Taxpayer?

A qualified taxpayer is an equity licensee that has received approval (including approval contingent upon the availability of funds) for the fee waiver and deferral program administered by the DCC. The DCC will provide the Franchise Tax Board (FTB) with a list of qualified taxpayers.

To be eligible for the CETC, businesses must have been approved for the DCC's equity program, which provides fee waivers and deferrals to individuals and businesses from communities that have been disproportionately affected by the War on Drugs. The equity program aims to provide assistance to these individuals and businesses to help them enter and succeed in the legal cannabis industry.

How to Claim the CETC?

Qualified taxpayers can claim the CETC by completing the appropriate forms when filing their state tax returns. The credit can be claimed for taxable years beginning January 1, 2023 through December 31, 2027.

It's important to note that the CETC is a nonrefundable tax credit, which means that it can only be used to offset state income tax liability. Any unused credit may be carried over for up to eight taxable years after the year the credit was generated.

In conclusion, the Cannabis Equity Tax Credit is a positive step towards promoting equity and access in California's cannabis industry. By providing financial assistance to qualified businesses, the state aims to level the playing field and provide opportunities for individuals and communities that have been disproportionately affected by the War on Drugs.

If you're a qualified taxpayer, make sure to take advantage of the CETC by claiming it on your state tax return. Keep in mind that the credit is nonrefundable and can only be used to offset state income tax liability.