Frequently Asked Questions

Due to the passing of the 2018 Farm Bill, the first year hemp/CBD companies can take advantage of the R&D tax credit is the 2019 tax year.

No. Currently, the hemp/CBD must be derived from the industrial hemp plant for businesses to take advantage of the federal R&D tax credit. Hemp/CBD products sourced from the cannabis sativa plant are not eligible.

Industrial hemp and hemp-derived products and businesses are no longer considered controlled substances.

No. Because cannabis and cannabis-derived products are still considered controlled substances, companies working in this area of the industry cannot claim federal R&D tax credits.

Cannabis and cannabis-related businesses are still considered a controlled substance, and therefore illegal under federal laws. Thus, IRC Section 280E applies to these businesses.

Yes. However, whether your company is eligible depends on the type of registered business (e.g. C-corp versus LLC).

There are many online resources with information on state-specific regulations for cannabis (plant-touching) businesses, but some are more trustworthy than others. For a reliable overview of state-by-state rules and regulations, see here.

Yes. If the ancillary business is not involved in controlling or trafficking a controlled substance (cannabis, etc.), then the business is not Section 280E limited. It can deduct its expenses and claim federal and state R&D tax credits.

There are several hemp/CBD-centric activities and cannabis ancillary industries—ranging from genetics companies to developers of sustainable packaging—that can now claim R&D tax credits. For a comprehensive list of sub-industries and products that potentially qualify, see here.

Many activities are considered research and development. If your company is working to create something new, or improving on an existing product or process, you most likely qualify.