Withum Sounding Board · 2026-07-30 · 12 min
Key moments - from our scoring
Substance score
58 / 100
Five dimensions, 20 points each
New York's cannabis market has grown to $2.5 billion in sales with dispensaries doubling in the past year, creating significant opportunities for new cultivators entering the space. However, many companies rush into production without understanding available tax incentives that can provide material financial benefits. Jonathan Treader, from Withum's Batavia office, emphasizes that cannabis companies must plan their entity structure and site selection strategy before beginning operations to qualify for New York's aggressive agricultural tax credit programs. The state's recognition of cannabis as an agricultural crop in 2024-2025 unlocked substantial benefits: a 20% refundable investment tax credit for qualified farms (versus 4% for manufacturers), agricultural real estate tax exemptions, workforce retention credits of $1,200 per employee earning over 500 hours annually, and potential Brownfield remediation credits ranging from 10-40%. Critical to accessing these benefits is maintaining a two-thirds revenue threshold from agricultural operations, which requires careful entity structuring - using brother-sister entities rather than holding company subsidiaries to ensure the revenue test applies entity-by-entity rather than on a consolidated basis. Treader warns that refundable credits are federally taxable in the year received and emphasizes that all substantiation must be prepared before New York State's inevitable audit, which occurs before credit disbursement.
Non-agricultural cannabis manufacturers receive a 4% New York State investment tax credit on equipment purchases, while qualified farms (where two-thirds of revenue comes from agriculture) receive a 20% refundable credit, making a $1 million greenhouse investment worth $200,000 in credits versus $40,000.
Yes, properly structured farming entities can layer the 20% investment tax credit, workforce retention credits ($1,200 per employee per year), school property tax credits, and agricultural real estate tax exemptions simultaneously, though entity structure must be planned carefully to maintain the two-thirds agricultural revenue requirement.
Enrollment must occur before any remediation or development work begins; once work is completed, companies become ineligible for these programs, making pre-project planning essential.
Companies should use brother-sister entity structures rather than holding company subsidiaries, ensuring the two-thirds agricultural revenue test is applied entity-by-entity so retail or other non-agricultural revenue doesn't disqualify the farming entity.
Yes, all New York State refundable credits are federally taxable in the year the credit is received, requiring companies to plan for additional federal income tax liability when calculating net cash flow benefits.
Our reviewer’s read on each dimension, with quotes from the episode.
For a 12-minute episode, the credit-stacking discussion is genuinely information-dense - Brownfield, Excelsior, the agricultural investment tax credit jump from 4% to 20%, the $1,200-per-employee workforce retention credit, and the federal taxability trap are all actionable. However, the opening market statistics, the running Narnia jokes, and the host's repeated affirmations eat into the runtime.
if you're a qualified farm and two thirds of your revenue comes from agriculture, that 4% credit goes up to 20%. So you do a million dollar greenhouse, you're looking at a uh, potential 20%, $200,000 refundable tax credit
any farming e that works over 500 hours is eligible for a $1200, uh, tax credit from New York State
The agricultural-classification angle for cannabis following the governor's 2024/2025 declaration is a genuinely non-obvious hook that most operators would miss, and the brother-sister vs. holding-company entity structure caveat is a practical, under-discussed wrinkle. However, the overall format is conventional 'credits you're leaving on the table' advisory content with no contrarian or first-principles framing.
At the end of 2024 or 2025, the governor of New York basically said that that cannabis is an agricultural crop which then makes it eligible for all the agricultural benefits
Brother Sister would maybe be more of a better structure because you know, where it's not all flowing up to a, to a singular entity, but it can be entity by entity basis for that 2/3 test
Jonathan Treader is a credible, practising CPA-partner who has clearly navigated these specific credits with real clients and has developed audit-ready documentation templates, which signals genuine hands-on experience. However, he is an advisor rather than an operator who has built a cannabis business at scale, and this is effectively an internal firm-branded podcast, which limits the practitioner credibility ceiling.
we've kind of developed templates for clients when we're going in and claiming these credits when, when New York State comes knocking for the documentation we can just basically turn over package of information that we know is, is pretty much audit proof
Brownfield's almost 100% you're going to get audited before you get the credit
The episode is well-stocked with named programmes (Brownfield, Excelsior, ESD, agricultural investment tax credit), precise percentages (4% → 20%), concrete dollar illustrations ($1M equipment → $200K refund), specific thresholds (2/3 revenue, 500 hours), and a named geographic market with figures ($2.5B actual, $6.1B projected by 2033). The main gap is the absence of named client examples or case studies.
you do a million dollar greenhouse, you're looking at a uh, potential 20%, $200,000 refundable tax credit coming back from New York State
the market there is doing about 2.5 billion in sales since it got started, eyeing about 6.1 billion by 2033
The host asks one genuinely sharp follow-up - the unitary vs. entity-by-entity question on the 2/3 revenue test - that surfaced a practically important structural nuance. But most questions are affirming or leading ('that all sounds really exciting'), there is no pushback on any claim, and several minutes are spent on Narnia jokes and self-congratulatory asides that a tighter host would have cut.
is the test done on a unitary basis? Do they look at 2/3 of the enterprise revenue or are you actually able to silo that subsidiary like that?
I'm looking at New York right now because I'm thinking that it might be a great place to become a farmer. I, uh, hadn't really considered that for myself personally, but why the heck not?
Computed from the transcript - who did the talking, and the words that came up most.
New York's cannabis market is already at $2.5B in sales and heading toward $6.1B by 2033, but the biggest opportunities for growers may be sitting in the state's tax code. On this episode of What the Hemp , Withum's Ray Owens and Jonathan Tretter unpack the New York State credits and incentives cannabis producers should line up before they ever pick a site: the Brownfield Cleanup Program, Excelsior Jobs incentives, the 20% refundable Investment Tax Credit available to qualified farms, agricultural real estate exemptions, and the Workforce Retention Credit. They also flag the mistakes that trip up operators. If you're building, growing, or investing in New York cannabis, this is the planning conversation to have before you sign a lease.
Transcribed and scored by The B2B Podcast Index.
Speaker A: Foreign.
Speaker B: Hello, everybody. This is Ray Owens coming to you from William Smith and Brown's Cannabis Advisory Services practice. And on, uh, today's installment of our what the Hemp Podcast, we have my partner Jonathan Treader up here from our NARNI office. Sorry, I mean Batavia, New York office. And we are going to be talking a little bit about New York State and things that are cannabis companies might want to consider if they're getting started in that state. And one of the reasons why we're talking about it today is we were looking up some statistics and we see that the market there is doing about 2.5 billion in sales since it got started, eyeing about 6.1 billion by 2033. But also the amount of dispensaries in that state has doubled in the last year. So we see a lot of opportunity for new business and we wanted to get ahead of new businesses opening and talk to you a little bit about some New York State credits and other things to consider that might impact your business. So, Jonathan, thank you for joining me today. Very happy to have you.
Speaker A: Yeah, no, thanks for having me. Looking forward to this. Like you said, from Narnia farm country here in western New York. So just, uh, excited for that conversation.
Speaker B: Excellent. And I think we should give extra Brownie points to anybody on the podcast today. You can actually pick out Batavia on a map because I had no idea where it was. So just a very, very simple place to start. I think a lot of, a lot of cannabis companies, one of the things we see is that they really rush into trying to get product out the door because the ramp up cycle and the licensing process is so long that they just take the first available site, they start immediately growing and they rush to try and get product out, but cash in, because cash is still king. And so I'm just curious, from your tax practice and other similar companies you've worked with, what should people be thinking about that they might not otherwise be thinking about very early on in that process before they just rush product out the door?
Speaker A: Yeah. So, you know, in New York State, if you're considering being a producer cultivating growing cannabis, there's some programs that you can take advantage of. But like I'll, I'll start with the Brownfield program, but that's something you have to get into before you can be eligible for that program. So, you know, if you're looking to, to do a greenhouse, you know, restore, restore a property that may have some environmental issues, Brownfield program. Program's great to get into. The credits you can get are anywhere from 10 to 30 or 40% refundable New York State credits on rehab that you're doing to an environmental property. But once you do the work, it's too late to get into the program, so you got to do it from the start. Same with New York State. If you're working with ESD trying to get any incentives for job growth, it's really, you can't put the toothpaste back in a tube per se. So I know that it's a rush to revenue, but also you could be leaving a lot of money on the table if you jump in without looking at all your options.
Speaker B: Okay, great. And so you need to know that you want to do these things before you even pick a site. Is that correct?
Speaker A: Yeah, no, that's absolutely correct. Yeah. And with, with New York State they can get aggressive with, with the incentives that they could offer you, whether it's excelsior programs. You know, they're competing with 49 other states in the US for, for these sites. So don't you don't want them to know you've already made a decision, quite honestly, like you want them to know that, that they're competing with other, with other sites in other states for, for these projects to really maximize the benefit that you can have with.
Speaker B: Okay. And I appreciate that. And that's probably really applicable to multi state operators that maybe have the ability to go into other states. But I know in cannabis a lot of our companies are going to be very single state minded because they had to create that entity in that state. They had to go specifically for that New York license. You know, it's very kind of regulated like that, at least until we see all those, those scheduling barriers come down that might allow for intrastate commerce. So just speaking specifically to New York and these credits and companies that are singularly focused in New York, are these credits available to retailers and producers alike or is this very simply the agricultural side, the guys who are growing it?
Speaker A: Yeah, I mean New York State is a very agricultural friendly state I would say in terms of tax credits and incentives. So it's a lot more on um, like the production ag side as we call it, you know, the growers, the cultivators, not, not the retail side, those that are actually growing the crop, you know, and then sending it to market. So that's where, where the large opportunity is in New York State. And I know I said multi state, but they're like there's counties that are aggressive with this. So even if you haven't decided where in New York State, you want to do the project. But if, you know, if there's competing counties across the state that could also leverage, leverage the, the opportunity for you.
Speaker B: Okay, and in what county is Narnia?
Speaker A: In Genesee County.
Speaker B: Okay. Okay. So um, you might have Brownfield, you might have Excelsior. Is it important that you identify as an agricultural company when going through this process and are there other, other benefits to the fact that it sounds like New York is really cool with a cannabis company being an agricultural company?
Speaker A: Yeah. At the end of 2024 or 2025, the governor of New York basically said that that cannabis is an agricultural crop which then makes it eligible for all the agricultural benefits that like you know, a row crop would have. So 20% investment tax credit, that's ref. So New York state has a 4% investment tax credit for qualified manufacturers. You know, you buy a million dollars worth of equipment, you're going to 4% New York State tax credit. However, if you're a qualified farm and two thirds of your revenue comes from agriculture, that 4% credit goes up to 20%. So you do a million dollar greenhouse, you're looking at a uh, potential 20%, $200,000 refundable tax credit coming back from New York State. It's in a lot of cases New York State farms really view it as a, financing me for these projects to make them viable to, to really put cash back and you may need some bridge financing but it's really, it's a, it's a pretty big opportunity just not to keep going. But on, on the real estate, on the real estate tax side, New York State has agricultural exemptions. So if you're considered an agricultural entity you could get preferential real estate tax tax treatment and you know, lower real estate tax rates. So it's not a tax credit that's money back in your pocket, it's just less money that you're spending each year on, on real estate taxes.
Speaker B: So I ah, mean that works too right? A dollar saved is dollar earned and you're talking about cannabis where cash is still king unfortunately. So actually the idea of some property tax savings is pretty exciting too because you know, I know there's always questions about income tax credits because you had two e. Luckily New York is decoupled so that's not a state level issue. You may still have some federal issues about what to do with that money. But that all sounds really exciting because it sounds like no matter where you look there's just dollar signs, dollar signs. It sounds like a startup company. If you're if you're in the TR state area, you should really look at New York to get started.
Speaker A: Absolutely. And I think to the point of starting early and looking at your options, I think a lot of these, like I said, you have to, you have to be a, you know, qualified farmer, which is two thirds of your revenue has to come from, from agriculture. I think the way you, you set up your organization, entity structure is important to make sure you can really hit that 2/3 farming exemption. Because with that comes there's, there's way, there's a workforce retention credit. So if you're, if you're considering a farming entity, any farming e that works over 500 hours is eligible for a $1200, uh, tax credit from New York State. So, you know, that doesn't preclude you from investment tax credit from the ag exemption. There's also school property tax credits for farming entities. So you can really see how these credits can really snowball and build on top of each other. And like the workforce retention credit isn't a one year credit, it's a credit for every year that you're paying out wages.
Speaker B: Excellent. No, I like everything I'm hearing. I mean, there's only so many reasons for optimism in cannabis right now and obviously everybody's looking federally at rescheduling, but I mean, I'm looking at New York right now because I'm thinking that it might be a great place to become a farmer. I, uh, hadn't really considered that for myself personally, but why the heck not? Um, in terms of common, um, mistakes and some other takeaways, I mean, I'm hearing all these dollar signs, I'm hearing all these great reasons to do it. I know you kind of opened the call by saying you got to get ahead of this. You got to go in with a plan. Any common mistakes you see from your clients, any way that they're messing up that brownfield cleanup credit or Celsius or any of these other ones, I just
Speaker A: think, you know, entity structure is important because a lot of times the revenue test is based on, on the entity by entity. So creating a farming entity separate from maybe a retail entity is important to make sure you're not, you're not having other sources of revenue that could really trip up the 2/3 revenue tests that make you, you know, a qualified farmer for New York State is important. So really that's, that's an important thing from, from the start. I guess another thing to remember the year after you get these credits is New York State refundable credits. Are federally taxable. So, you know, that's just something to, to keep in mind. If you are eligible for these, it's a great deal, but it will, you will have to pick it up as federal income the next year when you receive it. A lot of times that catches clients and farmers by surprise. So just, you know, things to think about as your cash flow planning and tax planning for, for some of these.
Speaker B: Okay, no, that's a great tip. I mean, we're always trying to see how we can reduce income if we have, uh, that limitation on expenses. So that's a good tip right there. I'm curious, when you mention the separate entities for a farming company versus a retail company, is the test done on a unitary basis? Do they look at 2/3 of the enterprise revenue or are you actually able to silo that subsidiary like that?
Speaker A: For New York state, you're really able to silo that subsidiary? I mean, I think maybe subsidiary is the wrong term. You don't want it to be a subsidiary of a holding company because the test would be based on the reporting taxable and not the reporting entity. So Brother Sister would maybe be more of a better structure because you know, where it's not all flowing up to a, to a singular entity, but it can be entity by entity basis for that 2/3 test.
Speaker B: Okay, no, great tip and I appreciate you laying that one out because I think a lot of people would have done that wrong with the holding company. One last question before I let you go to what about record keeping and what other kind of substantiation do you need? Um, is it, is it on the client? Is it on the tax preparer? Are the lawyers getting involved? What kind of costs and what kind of administration goes into pursuing some of these?
Speaker A: So I mean, quite honestly, with, with New York State, a lot of these refundable credits we're seeing, Brownfield's almost 100% you're going to get audited before you get the credit. Even New York State investment tax credit. New York State is going to audit the credit claims before they start sending out hundreds of thousands or millions of dollars of refunds. So you self certify, but just knowing that you're going to have to provide the substantiation before you get the money back. So they want to see copies of invoices where the money actually was paid out of what operating entity, stuff like that is important. So we've kind of developed templates for clients when we're going in and claiming these credits when, when New York State comes knocking for the documentation we can just basically turn over package of information that we know is, is pretty much audit proof. So I mean, audit proof sounds good.
Speaker B: I was, I did cringe there a little bit. You know, especially in cannabis, that word audit, like, that's a dirty word. We don't like to use that. So I guess what I pre gamed with you for this, this podcast, I should have given you the list of like five dirty words not to say, but I do, I do. I gained a lot of comfort when you talked about it being a smooth process and already kind of having, having a process going into that audit to make it very, um, easy on the, uh, the client. So I do appreciate that. Yeah, this has been really informative and really great. Um, any, any parting comments? Any last words?
Speaker A: I think it's, it's an exciting time in New York State in agriculture and cannabis. I think making sure all projects are financially viable. New York State's aggressive with that, so just happy to, happy to be part of the community here and, you know, helping businesses put some money back in their pockets.
Speaker B: I appreciate you coming to us to talk about that from the Narnia office. So, everyone, we're going to drop a link below as we take you out of here to an article that's going to follow up with a lot of these things we were talking about and some other credits that might be available to you. And is that, as always, if you have any questions or if we can help you out, please reach out to us here with them at our cannabis advisory practice. Have a great day.
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