Please ensure Javascript is enabled for purposes of website accessibility

Knowledge & Insights

Understanding The High-Road Cannabis Tax Credit (HRCTC)


Are you a commercial cannabis business in California looking to take advantage of the High-Road Cannabis Tax Credit (HRCTC)? This credit offers an opportunity for businesses to receive a 25% tax credit on qualified expenditures, up to a maximum of $250,000 per year. Read on to learn more about the HRCTC, who is eligible, and how to claim the credit.

What is the HRCTC?

The HRCTC is a tax credit available to California commercial cannabis businesses conducting a qualified cannabis operation. The California FTB will offer the credit for taxable years beginning January 1, 2023 and ending December 31, 2027. Additionally, taxpayers must make a tentative credit reservation and can claim the credit when they file their tax return.

Am I Eligible?

To be eligible, you must be a commercial cannabis business in California with either Type-10 (retailer) or Type-12 (micro-business) licenses. In addition, the business must provide full-time employees with the following:

  • Wages
  • Group health insurance
  • Retirement benefits or pension benefits, including employer-paid stock options.

Eligible taxpayers must also request a tentative credit reservation during the month of July each taxable year, or within 30 days of the start of their taxable year if it begins after July.

What Expenses Qualify?

Qualified expenditures for the HRCTC include wages for full-time employees and safety-related equipment, training, and services. You must pay full-time employees at least 150% ($23.25) but not more than 350% ($54.25) of the state minimum wage. They must also work an average of 35 hours per week or be salaried employees paid for full-time employment. In addition, wages for full-time employees may also include amounts paid for group health insurance, childcare benefits, retirement benefits, or pension benefits. Safety-related equipment and services include equipment primarily used for employee or customer safety, training for non-management employees on workplace hazards, and workforce development and safety training programs.

Tentative Credit Reservation

To claim the HRCTC, you will need to request a HRCTC Tentative Credit Reservation (TCR) from the California Franchise Tax Board. The reservation system will be available from July 1, 2023 through December 31, 2023. You can submit your reservation online and receive immediate confirmation.

Credit Amounts and Claiming the Credit

The amount of credit available is equal to 25% of qualified expenditures, with a maximum of $250,000 per taxable year. However, unused credit can be carried over for 8 taxable years after the year the credit was generated. To claim the credit, you must reduce any other deductions or credits claimed for qualified expenditures by the amount of the HRCTC. For businesses required to be included in a combined report under R&TC Section 25101 or authorized to be included in a combined report under R&TC Section 25101.15, the aggregate credit claimed by all included taxpayers is limited to $250,000 per year.

Cannabis Tax Help

The HRCTC is a valuable tax credit opportunity for California commercial cannabis businesses. To learn more, you can review the requirements on the State of California Franchise Tax Board website.

To find out if you qualify and how much you could save, reach out to our team of financial experts at GreenGrowth CPAs. We are here to help your cannabis venture through any level of the accounting, tax filing, or business cycle. 

We employ several financial programs to assist the company with its fiscal responsibilities, including tax planning and complianceaccounting & finance supportaudit preparationtax controversy support, and much more.

Request a Free Consultation & learn how GreenGrowth CPA’s can help your business grow.

Let's Talk