Massachusetts’ Cannabis Social Equity Trust Fund to Soon Offer Grants

AAFCPAs would like to make clients aware that Massachusetts’ supplemental budget passed late last year includes a procedural fix to the Cannabis Social Equity Trust Fund. This means the state-wide cannabis industry, particularly communities of color, may soon gain access to millions in state funding meant to diversify entrepreneurship opportunities.

One of the greatest obstacles to entrepreneurship has been access to capital, which tends to disproportionately affect Black and minority business owners—specifically those harmed by the War on Drugs. This issue has only been exacerbated by the fact that the cannabis industry is still federally illegal, making it hard for cannabis businesses to obtain traditional bank lending or investor funding.

Established in August 2022 and managed by the Executive Office of Economic Development (EOED), The Cannabis Social Equity Trust Fund was enacted to level the playing field across the Commonwealth. Of the taxes levied on cannabis sales, 15 percent is collected to support the fund, which will provide grants to qualified applicants. Note that other states including New Jersey also offer social equity funding.

Governor Maura Healey’s fiscal 2023 supplemental budget, which was passed by the House and approved by the Senate, included a fix to the fund’s transfer mechanism. The Marijuana Regulation Fund, responsible for holding cannabis tax revenue, is now able to transfer that 15 percent in tax revenue into the Cannabis Social Equity Trust Fund, something it could not do previously due to a technicality in the way the law had originally been written. The EOED still needs to outline how the fund will operate and how it will distribute its initial round of funding.

Grants are to cover operational expenses, from payroll and rent to equipment, construction, and regulatory fees. Recipients are barred from using funds for cannabis products or paraphernalia. All applicants must show a provisional or final license from the Massachusetts Cannabis Control Commission. Since funds are limited, applicants are asked to prioritize their most urgent and immediate needs. Note that grants are capped at $100,000, with initial funding slated to focus primarily on existing operations.

AAFCPAs advises that interested and qualified clients prepare by gathering documentation able to demonstrate an urgent and immediate need. This may include net loss calculations or other paperwork demonstrating a negative cash flow. Applicants will need to devise a clear plan on fund allocation in accordance with regulations, as well. While many technical questions have yet to be answered including potential tax and financial statement implications, AAFCPAs’ Cannabis practice is following developments closely.

How We Help

AAFCPAs has provided accounting, assurance, tax, and consulting solutions to the cannabis industry since 2012. A pioneering leader in the industry, we help clients navigate complex funding along with regulatory, tax, 280E, entity structuring, and state-by-state requirements.

If you have questions, please contact David McManus, CPA, CGMA, Tax Partner & Cannabis Practice Leader at 774.512.4014 or dmcmanus@nullaafcpa.com, Janice O’Reilly, CPA, CGMA, Partner at 774.512.9046 or joreilly@nullaafcpa.com—or your AAFCPAs Partner.