Government Subsidies & Tax Breaks in Hemp Farming

CannaBlog by Calvin Shannon, Principal of Bridge West CPAs & Advisors to the Cannabis Industry

Before the passage of the 2018 Farm Bill, hemp—the cannabis plant’s wild cousin—was classified as a Schedule I drug, even though it contains only trace amounts of the intoxicating cannabinoid THC. Today, the situation could hardly be more different, as government farming subsidies, hemp farm loans, and tax breaks make farming hemp a tempting proposition.

If you’re interested in exploring some of the tax breaks for farmers and processors of industrial hemp, this CannaBlog is for you. We’ll explore some of the key concerns and challenges around ensuring your business qualifies for these special dispensations and incentives.

Farming Hemp: How to Maximize Federal Tax Breaks and Subsidies

As you may be aware, hemp farming has a long history in North America. In Colonial days, American farmers were actually required to devote a percentage of their acreage to the cultivation of this commercially critical plant.

Now that hemp has been descheduled as a controlled substance, American farmers can once again cultivate hemp for fiber, oil, seeds, and—of course—the cannabinoid CBD.

We’ve, written before about some of the barriers to profitability for cannabis producers, including of the U.S. Tax Code. However, Section 280E is generally not applicable to growers of hemp, and they can claim for costs associated with developing products such as CBD tinctures and topicals, hempcrete, and other offerings.

Enterprises that are still in startup mode, defined as having fewer than five years of revenue generation, can use this tax credit to offset their future payroll taxes. In addition to this federal tax credit, a majority of states now offer their own R&D tax credits as well, making this an opportunity no hemp producer should ignore.

To be clear, a wide variety of hemp-related businesses—from makers of seed-to-sale software to sustainable packaging producers, CBD testing labs, and beyond—can and should take advantage of these credits.

Hemp Farm Loans: A Green Opportunity

We’ve previously written about financing for the cannabis industry, and how this fast-growing sector of the economy has historically been locked out of traditional financing and banking services.

Now, thankfully both cannabis and hemp producers are beginning to experience a welcome ‘turn of the tide’ as financial institutions exhibit greater willingness to reach out to the industry. This is especially true for hemp, given its recent federal descheduling.

Bridge West CPAs & Advisors,  is in constant communication with our cannabis and hemp clients and their other advisors.  Over the past twelve months, we have seen an increase in bank lending and business loans, financing, and funding, which is really great for the cannabis industry.

If you’re interested in learning more and connecting with business lenders, we invite you to revisit our recent CannaBlog on financing options for hemp and cannabis ventures.

Bridge West CPAs & Advisors: Expert Guidance and a Full Range of Accounting, Tax, and Advisory Services for the Industrial Hemp Industry

The hemp industry is fast-moving and dynamic. That’s why Bridge West CPAs & Advisors keep a close eye on industry news and trends, including the latest incentives for hemp growers and producers. If you’re seeking skillful and clear-eyed guidance, we invite you to contact us.

Now into our second decade of helping entrepreneurs navigate hemp and cannabis regulations, conduct business valuations, and comply with state and IRS audits, Bridge West CPAs & Advisors stand ready to help get you on the road to success.

Do you have further questions about hemp farming subsidies and tax breaks? Don’t hesitate to contact Calvin Shannon or reach out to schedule a complimentary consultation; we’re here to help.