HSB 687 (LSB 6003YC (2) 91)

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 from the individual and corporate income taxes for expenses incurred by medical cannabidiol manufacturers and dispensaries, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  46.  Subtract, to the extent included, the amount of business expense for a medical cannabidiol manufacturer or a medical cannabidiol dispensary licensed pursuant to chapter 124E without regard to section 280E of the Internal Revenue Code. This subsection does not apply when no licensed entity acting within the scope of the license pursuant to chapter 124E incurred the expense, or to an expense incurred in violation of section 124.401 and is not otherwise authorized by law.
    Sec. 2.  Section 422.35, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  15.  Subtract, to the extent included, the amount of business expense for a medical cannabidiol manufacturer or a medical cannabidiol dispensary licensed pursuant to chapter 124E without regard to section 280E of the Internal Revenue Code. This subsection does not apply when no licensed entity acting within the scope of the license pursuant to chapter 124E incurred the expense, or to an expense incurred in violation of section 124.401 and is not otherwise authorized by law.
    Sec. 3.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2026, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   Under federal law, a medical cannabidiol manufacturer and a medical cannabidiol dispensary are prohibited from taking business expense deductions by section 280E of the Internal Revenue Code. Currently, Iowa computes individual net income and corporate taxable income based upon federal income calculations, and therefore Iowa currently prohibits a medical cannabidiol manufacturer and a medical cannabidiol dispensary from taking business expense deductions as well because the deductions are not allowed at the federal level.
   This bill allows a medical cannabidiol manufacturer and a medical cannabidiol dispensary licensed pursuant to Code chapter 124E to deduct business expenses for purposes of the Iowa individual income tax or corporate income tax. The bill prohibits the deduction if no licensed entity acting within the scope of the license pursuant to Code chapter 124E incurred the expense, or the expense is incurred in violation of Code section 124.401 (prohibited acts) and is not otherwise authorized by law.
   The bill applies retroactively to tax years beginning on or after January 1, 2026.