CANNABIS COMPANIES AND THE CORONAVIRUS EMPLOYMENT TAX CREDITS
The Families First Coronavirus Response Act and the CARES Act established two new tax credits for 2020 during the Corona Virus Pandemic, which may be applicable to Cannabis Companies.
Paid Sick or Family Leave
The Families First Coronavirus Response Act established a new tax credit for paid family and medical leave, for employers with under 500 employees, between April 1, 2020 and December 31, 2020. The act allows employers to take a credit of $511 per day for up to 10 days for employees that have Coronavirus symptoms and are seeking a medical diagnosis. In addition, the act allows for up to $200 per day up 10 days for an employee that is caring for someone with Coronavirus or is caring for a child because their school or childcare facility is closed.
Employee Retention Credit
The CARES Act created the Employee Retention Credit, which provides a 50% credit against employment taxes for wages paid up to $10,000, between March 13, 2020 and December 31, 2020. The credit can be taken in advance by filling out and faxing form 7200 to the IRS, reducing your federal tax deposits, or taking a refund when you file your 2nd to 4th quarter 2020 form 941. To be eligible for the credit, you either had to have operations fully or partially suspended because of a government order limiting commerce, travel, or group meetings due to COVID-19 or have 50% less gross receipts from the prior 2019 calendar quarter/ending when gross receipts reach 80% from the prior calendar quarter.
Eligibility of Cannabis Companies for Employment Credits
IRC 280E disallows Credits for Cannabis Companies. However, IRC 280E is under Subtitle A (Income Taxes), which does not apply to Subtitle C, (Employment Taxes) of the Internal Revenue Code. Therefore, both credits should be available to Cannabis Companies if they meet the requirements of both credits, unless the IRS publishes other guidance, which it has not done to the date of this article.