The legislation, sponsored by Texas Rep. Jodey Arrington, is similar to a bill recently offered by Sens. James Lankford, R-Okla., and Pete Ricketts, R-Neb. Why do they want to hurt banks chances to be more solvent due to deposits by the cannabis industry?<\/p>\n
Forcing state-licensed cannabis businesses to continue paying punitive taxes on their ordinary business expenses, even should cannabis be federally rescheduled, is now a bicameral effort in the U.S. Congress.<\/p>\n
Congressman Jodey Arrington, R-Texas, who chairs the House Budget Committee, and six of his fellow representatives in the U.S. House introduced legislation, H.R. 1447, on Feb. 21. The bill aims to amend the Internal Revenue Code (IRC) of 1986 to maintain the prohibition on any deduction or credit associated with a trade or businesses involved in \u201ctrafficking\u201d cannabis.<\/p>\n
Under Section 280E of the IRC, businesses involved in Schedule I or II drugs under the Controlled Substances Act are unable to deduct their ordinary business expenses\u2014such as payroll, rent and utilities\u2014from their taxable incomes.<\/p>\n
The hope for many U.S. cannabis businesses, the largest of which have the burden of paying roughly $100 million a year in taxes to a federal government that doesn\u2019t recognize them as legitimate, is that the Department of Justice\u2019s (DOJ) current proposal to reclassify cannabis as a Schedule III substance would provide them with 280E tax relief to operate more sustainably.<\/p>\n
However, Arrington and six of his colleagues in the upper chamber are now hoping to prevent that from happening. The legislation is cosponsored by Reps. Chuck Edwards, R-N.C.; Gregory Murphy, R-N.C.; Vern Buchanan, R-Fla.; Blake Moore, R-Utah; Gary Palmer, R-Ala.; and Pete Sessions, R-Texas.<\/p>\n
Although the DOJ\u2019s Schedule III proposal remains sidelined by an interlocutory appeal, these lawmakers are trying to restrict the proposal\u2019s impact should an administrative law judge hearing resume with a favorable outcome for cannabis businesses.<\/p>\n
Although the text of H.R. 1447 wasn\u2019t available as of Feb. 24\u2014and no related bills were listed\u2014Republican Sens. James Lankford, R-Okla., and Pete Ricketts, R-Neb., introduced legislation with a nearly identical title earlier this month.<\/p>\n
\u201cMarijuana doesn\u2019t make our families stronger, our streets safer, or our workplaces more productive,\u201d Lankford said in a Feb. 7 press release. \u201cBusinesses who sell federally illegal drugs\u2014including marijuana businesses\u2014shouldn\u2019t get federal tax breaks. This bill clarifies federal tax law to make sure a federally illegal product does not have a federally legal tax deduction.\u201d<\/p>\n
At the time, Kevin Sabet, the CEO and president of the prohibitionist group Smart Approaches for Marijuana (SAM), took credit for the foundation of the legislation, hailing the bill on social media as a mechanism to ensure cannabis businesses continue to pay $2.3 billion annually in taxes that they otherwise wouldn\u2019t be obligated to pay under the designation of a traditional American business.<\/p>\n
The Senate\u2019s version of the bill is titled the \u201cNo Deductions for Marijuana Business Act.\u201d<\/p>\n
On Feb. 24, SAM drew attention to a Washington Post article, suggesting that Arrington\u2019s bill serves as companion legislation for the Senate\u2019s version.<\/p>\n
\u201cArrington introduced a bill late last week\u2014when the House wasn\u2019t even convened\u2014to prohibit companies involved in the cultivation or sale of marijuana from claiming business-expensing tax deductions,\u201d The Washington Post reported.<\/p>\n
Editor\u2019s note: Cannabis Business Times reached out to Arrington\u2019s office for comment and a copy of the House version of the bill.<\/p>\n
The bicameral effort to make Section 280E a more permanent hindrance to cannabis businesses comes at a time when just 27% of U.S. cannabis businesses are profitable, according to a 2024 Whitney Economics report.<\/p>\n
H.R. 1447 was referred to the House Committee on Ways and Means. <\/p>\n
Courtesy of Tony Lange and Cannabis Business Times.<\/p>\n","protected":false},"excerpt":{"rendered":"
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