Regulatory – Tax Agency Guidance – CCA
Regulatory – Tax Agency Guidance – CCA – we requested written advice from California Franchise Tax Board [“FTB”], California Dept. of Tax and Fee Administration [“CDTFA”], California Dept. of Food & Agriculture [“CDFA”] CalCannabis, and the Bureau of Cannabis Control [“BCC”] with respect to their agencies’s filing and notice requirements, and operational guidelines for Cannabis Cooperative Associations [“CCA’s] as created by Stats. 2017, Ch. 27, Sec. 107].
We are posting the responses which we have received to date and will update this document to reflect additional updates as we receive them.
Thank you for your question submitted to the Ask A Legal Expert program.Your question is: The California legislature in SB 94 created a new type of entity called a Cannabis Cooperative Association CCA See Stats 2017 Ch.27 Sec 107 also known as BPC 26220 262312 We believe that this new entity will file Federal Form 1120C with the IRS as a non-exempt cooperative taxed under IRC Sec 1381 The entity has several 100 percent owned corporate subsidiaries and a couple of California LLC’s which are treated as disregarded entities Our assumption is that the should file Form 100 and that any 100 percent owned corporate subsidiaries or disregarded entities would file in a manner similar to that which is done for Qualified S Corporation Subsidiaries Please confirm our understanding, and add or correct as appropriate.We are unable to answer your question through Ask A Legal Expert but can provide information to assist in your determination. Generally, cooperative associations file Form 100. Please read more information: https://www.ftb.ca.gov/
businesses/cannabis-law.shtmlEligible corporations that elect to be taxed as an S corporation file Form 100S. See for more information:Parent S corporations attach Schedule QS to Form 100S for entities the parent has elected to treat as qualified subchapter S subsidiaries (Qsubs). Please read more information: https://www.ftb.ca.gov/forms/ 2017/17_100sqs.pdfThe parent pays the $800 minimum tax for each QSub that is incorporated, qualified, or doing business in California.The Franchise Tax Board’s Ask a Legal Expert program provides an informal response based on the information provided by you and is subject to the limitations stated on the Franchise Tax Board public website. Responses to inquiries submitted to Ask a Legal Expert are not written advice within the meaning of Revenue and Taxation Code Section 21012. To obtain written advice taxpayers or representatives must request a Chief Counsel Ruling in accordance with FTB Notice 2009-08, Rulings Guidelines, https://www.ftb.ca.gov/law/ notices/2009/2009_08.pdf.
CDTFA came around and has now issued both Sales Tax and Cannabis Permits to a number of the CCA’s which are our clients.
Regulatory – Tax Agency Guidance
CDFA – CalCannabis’s Response
Sorry for the long wait with answering your questions. Please see the responses in purple.
- What are the reporting requirements for the CCA, and it shareholders that have Type 1 and 2 CalCannabis Cultivation licenses at formation? annually? The only reporting that we are requiring for cooperatives is that they disclose the name of the cooperative when they apply for their license with CDFA and provide a list of the members associated with the cooperative. This information can be found in the paper application and in the licensing system online.
- Are there any notice events based on operations? No
- Are there any registration requirements if the CCA acquires a Manufacturing or Distribution license in from CDPH or BCC? The other licenses should be listed as State Issued Cannabis Licenses on their cultivation application, if they are already licensed with CDFA prior to acquiring the manufacturing or distribution license, they would need to notify us of the change when it occurs. This could be done by email or postal mail.
- Are there any coordination requirements with CDTFA? Please check with CDTFA to determine if there are any additional requirements that need to be met. Some licensing data is provided to CDTFA via the Track and Trace System for all licensees in general, but this is not specific to the cooperative associations.
Thank you for the update. We would appreciate a clarification that your use of the term “cooperatives” is specifically intended to include “cannabis cooperative associations”.
Yes, we are only specifically referring to cannabis cooperative associations as referenced in Division 10 of the Business and Professions Code, Chapter 22, commencing with Section 26220.