Senate File 2157 - Introduced SENATE FILE 2157 BY BROWN A BILL FOR An Act relating to medical cannabidiol by providing deductions 1 from the individual and corporate income taxes for 2 expenses incurred by medical cannabidiol manufacturers and 3 dispensaries, and exempting the sale of medical cannabidiol 4 products from the sales and use tax, and including 5 retroactive applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5971XS (3) 89 jm/jh

S.F. 2157 DIVISION I 1 DEDUCTIONS FROM INDIVIDUAL AND CORPORATE INCOME TAXES 2 Section 1. Section 422.7, Code 2022, is amended by adding 3 the following new subsection: 4 NEW SUBSECTION . 63. Subtract, to the extent included, 5 the amount of business expense for a medical cannabidiol 6 manufacturer or a medical cannabidiol dispensary licensed 7 pursuant to chapter 124E without regard to section 280E of the 8 Internal Revenue Code. 9 Sec. 2. Section 422.35, Code 2022, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 31. Subtract, to the extent included, 12 the amount of business expense for a medical cannabidiol 13 manufacturer or a medical cannabidiol dispensary licensed 14 pursuant to chapter 124E without regard to section 280E of the 15 Internal Revenue Code. 16 Sec. 3. RETROACTIVE APPLICABILITY. This division of this 17 Act applies retroactively to January 1, 2022, for tax years 18 beginning on or after that date. 19 DIVISION II 20 EXEMPTION FROM SALES AND USE TAX 21 Sec. 4. Section 423.3, Code 2022, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 108. The sales price of the sale of 24 a medical cannabidiol product by a medical cannabidiol 25 manufacturer or a medical cannabidiol dispensary pursuant to 26 chapter 124E. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 DIVISION I. Under federal law, a medical cannabidiol 31 manufacturer and a medical cannabidiol dispensary are 32 prohibited from taking business expense deductions by section 33 280E of the Internal Revenue Code. Currently, Iowa computes 34 individual net income and corporate taxable income based upon 35 -1- LSB 5971XS (3) 89 jm/jh 1/ 2

S.F. 2157 federal income calculations, and therefore Iowa currently 1 prohibits a medical cannabidiol manufacturer and a medical 2 cannabidiol dispensary from taking business expense deductions 3 as well because the deductions are not allowed at the federal 4 level. 5 This bill allows a medical cannabidiol manufacturer and 6 a medical cannabidiol dispensary licensed pursuant to Code 7 chapter 124E to deduct business expenses for purposes of the 8 Iowa individual income tax or corporate income tax. 9 The division applies retroactively to tax years beginning on 10 or after January 1, 2022. 11 DIVISION II. The bill exempts from the sales and use 12 tax the sales price of a medical cannabidiol product by a 13 licensed medical cannabidiol manufacturer or a licensed medical 14 cannabidiol dispensary. The sales and use tax exemption takes 15 effect July 1, 2022. 16 -2- LSB 5971XS (3) 89 jm/jh 2/ 2