Illinois Cannabis Legalities: Navigating The Marijuana Income Surcharge Tax

Thanks to a slew of recent legislative and gubernatorial changes, the path to Illinois cannabis legalization is bright. To prep for the possibility, let’s review the Marijuana Income Surcharge Tax. It’s a levy that could significantly impact marijuana entrepreneurs, startups, and investors.

What Is the Illinois Marijuana Income Surcharge Tax?

The “Land of Lincoln” already supports a medical marijuana industry codified in the Illinois’ Compassionate Use of Medical Cannabis Pilot Program Act. The law includes a surcharge on income arising from the sale or exchange of:

1. Cannabis-related capital assets;
2. Depreciable marijuana business property;
3. Real property used in the trade or business;
4. Section 197 intangibles (i.e., business acquisition assets acquired after 1991 or 1993, depending) of an “Organization Registrant,” like (but not limited to) cultivation centers, dispensaries, and S Corporation shareholders.

A critical difference between the marijuana surcharge tax and other types of levies (i.e., income tax) is that it’s not rate-based. Instead, the surcharge tax is derived from a complicated transaction calculation, which is why it’s wise to work with an Illinois cannabis tax attorney.

Fortunately, taxpayers can leverage several exceptions to the surcharge, including bankruptcy and certain transfers of registration, acquisitions, and restructurings.

Illinois Cannabis Legalization: How Did We Get Here?

Cannabis legalization in Illinois is gaining steam. Recent wins include a law that allows opioid patients under physician’s care to switch to Cannabis without a medical marijuana card. Furthermore, incoming Illinois Governor-elect JB Pritzker has vowed to work on legalizing cannabis “nearly right away.”

Arcview Market Research analysts expect the cannabis market to hit $11 billion this year and $23 billion by 2022. The Marijuana Surcharge Tax represents just one of many compliance matters of which cannabis entrepreneurs should be aware.

Connect With An Illinois Cannabis Lawyer

Here at the Gordon Law Group, we believe that legalization is the best choice. It will fill government coffers and allow for a lucrative industry that will bolster Illinois’ economy.

If you’re in the Illinois medical marijuana business, we can help you work out the best tax positioning. Give us a call today to begin the conversation.