House lawmakers introduce bipartisan tax break legislation for cannabis companies

Oregon Representative Earl Blumenauer introduced legislation this week in the US House of Representatives that would allow regulated cannabis companies to take tax deductions that companies in other industries typically enjoy. The bill, known as the Small Business Tax Equity Act, was introduced Monday by Blumenauer, with bipartisan co-sponsorship by Democratic Rep. Barbara Lee of California, as well as South Carolina Rep. Nancy Mace and Rep. David Joyce of Ohio, both Republican .

Under Section 280E of the federal tax code, cannabis companies are denied most tax deductions offered to companies in other industries. State-legal marijuana businesses are allowed to deduct the cost of goods sold, while other expenses such as rent, payroll, and utilities are non-deductible for most cannabis businesses.

“State legal cannabis companies are denied equal treatment under 280E. They can’t fully deduct the cost of doing business, which means they pay two or three times what a similar non-cannabis business would pay,” Blumenauer, founder of the bipartisan Congressional Cannabis Caucus, said in a statement Monday. “This grotesquely unfair treatment leads people to cut corners. If Congress is serious about supporting small businesses and ending the illicit cannabis market, it makes sense that we allow legal cannabis operations to deduct business expenses just like any other industry.”

The Small Business Tax Equity Act would create an exemption from Section 280E to allow marijuana businesses operating in accordance with state law to make deductions related to the sale of marijuana as they would any other legal business.

“Without this legislation, Section 280E of the federal tax code prevents cannabis businesses from deducting ordinary expenses associated with running a small business, including rent, utilities and payroll,” Blumenauer’s office wrote. “You can’t claim the job opportunity tax credit if you hire a veteran; they cannot write off their American-made irrigation equipment; and they cannot make credits or deductions for construction or operating costs when they wish to revitalize a building for their operations.”

Cannabis companies and reform groups, including the National Organization for the Reform of Marijuana Laws (NORML), welcome Blumenauer’s bill to grant standard business tax deductions to companies in the regulated marijuana industry, noting that many companies struggle with high taxes and regulatory fees, as well as the Competition from an entrenched underground cannabis market.

“NORML commends the sponsors of this bill for their efforts to end the unjustified overtaxation of licensed, state-regulated cannabis companies across the country,” NORML Political Director Morgan Fox said in a statement from the group. “Enabling them the ability to take advantage of the same federal tax deductions that most other businesses enjoy will open up new opportunities in the legal cannabis industry and make it more competitive with the unregulated market, directly benefiting consumer health and public safety.” comes.”

“The two biggest challenges cannabis entrepreneurs are currently facing are lack of access to capital and unfair tax burdens,” said Saphira Galoob, executive director of the National Cannabis Roundtable. “By eliminating the impact of 280E on federally legal cannabis operations, Congress would enable these businesses, including small and minority operators, to remain financially viable and reinvest in their businesses, communities and workforce through tax credits and deductions that routinely become others offered to domestic industries. This relief is critical to an industry that employs hundreds of thousands of American workers and generates billions of dollars in state and federal taxes annually—albeit without access to traditional financial resources.”

Attempts to eliminate the effects of 280E are also underway in cannabis-legal states, many of which use federal tax legislation as the basis for state tax regulations. To date, 19 states have decoupled their tax laws from 280E, with further steps being taken in other states, including Connecticut, where lawmakers are currently considering such a move. Lucas C. McCann, Ph.D., co-founder and chief scientific officer of cannabis management consultancy CannDelta Inc., applauded efforts to eliminate Section 280E at the state level.

“The decoupling of 280E would allow these cannabis-related businesses to claim basic operating expenses,” McCann wrote in an email to High Times. “Failure to do so will inevitably result in the bankruptcy of many, which will likely help the illicit market continue to thrive as it did before legalization.”