House Study Bill 687 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON NORDMAN) 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 3 and dispensaries, and including retroactive applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6003YC (2) 91 jm/jh

H.F. _____ Section 1. Section 422.7, Code 2026, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 46. Subtract, to the extent included, 3 the amount of business expense for a medical cannabidiol 4 manufacturer or a medical cannabidiol dispensary licensed 5 pursuant to chapter 124E without regard to section 280E of the 6 Internal Revenue Code. This subsection does not apply when no 7 licensed entity acting within the scope of the license pursuant 8 to chapter 124E incurred the expense, or to an expense incurred 9 in violation of section 124.401 and is not otherwise authorized 10 by law. 11 Sec. 2. Section 422.35, Code 2026, is amended by adding the 12 following new subsection: 13 NEW SUBSECTION . 15. Subtract, to the extent included, 14 the amount of business expense for a medical cannabidiol 15 manufacturer or a medical cannabidiol dispensary licensed 16 pursuant to chapter 124E without regard to section 280E of the 17 Internal Revenue Code. This subsection does not apply when no 18 licensed entity acting within the scope of the license pursuant 19 to chapter 124E incurred the expense, or to an expense incurred 20 in violation of section 124.401 and is not otherwise authorized 21 by law. 22 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 23 retroactively to January 1, 2026, for tax years beginning on 24 or after that date. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 Under federal law, a medical cannabidiol manufacturer and 29 a medical cannabidiol dispensary are prohibited from taking 30 business expense deductions by section 280E of the Internal 31 Revenue Code. Currently, Iowa computes individual net 32 income and corporate taxable income based upon federal income 33 calculations, and therefore Iowa currently prohibits a medical 34 cannabidiol manufacturer and a medical cannabidiol dispensary 35 -1- LSB 6003YC (2) 91 jm/jh 1/ 2

H.F. _____ from taking business expense deductions as well because the 1 deductions are not allowed at the federal level. 2 This bill allows a medical cannabidiol manufacturer and 3 a medical cannabidiol dispensary licensed pursuant to Code 4 chapter 124E to deduct business expenses for purposes of the 5 Iowa individual income tax or corporate income tax. The 6 bill prohibits the deduction if no licensed entity acting 7 within the scope of the license pursuant to Code chapter 124E 8 incurred the expense, or the expense is incurred in violation 9 of Code section 124.401 (prohibited acts) and is not otherwise 10 authorized by law. 11 The bill applies retroactively to tax years beginning on or 12 after January 1, 2026. 13 -2- LSB 6003YC (2) 91 jm/jh 2/ 2