Oregon Representative Earl Blumenauer this week introduced legislation in the US House of Representatives that would allow regulated cannabis companies to take tax deductions normally enjoyed by companies in other industries. The bill, known as the Small Business Tax Justice Act, was introduced by Blumenauer on Monday, co-sponsored bipartisanly by fellow Democrat Barbara Lee of California, as well as Nancy Mays of South Carolina and Representative David Joyce of Ohio, both Republicans. .
Under Section 280E of the federal tax code, cannabis companies are denied most tax breaks offered to companies in other industries. State-legal marijuana businesses are allowed to deduct cost of goods sold, while other expenses including rent, payroll, and utilities are not deductible for most cannabis businesses.
“State legal cannabis businesses are denied equal treatment under 280E. They can’t fully deduct the cost of doing business which means they pay double or triple what a comparable non-cannabis business would,” Blumenauer, founder of the bipartisan Congressional Cannabis Caucus, said. he said in a statement on monday. “This hideously unfair treatment motivates people to cut corners. If Congress wants to get serious about supporting small businesses and ending the illegal cannabis market, it makes sense to allow legal cannabis operations to deduct business expenses, just like any other industry.”
Small Business Tax Equity Act It would create an exception to Section 280E to allow marijuana businesses that operate under state law to take deductions associated with the sale of marijuana like any other legal business.
“In the absence of such legislation, Section 280E of the federal tax code prohibits cannabis companies from deducting ordinary expenses associated with running a small business, including rent, utilities, and payroll,” Blumenauer’s office wrote. “They can’t claim the Employment Opportunity Tax Credit if they hire a veteran; they can’t depreciate American-made irrigation equipment; and they can’t take any credit or deduction related to construction or operating costs if they want to revitalize a building for their operations.”
Cannabis companies and reform groups, including the National Organization for the Reform of Marijuana Laws (NORML), are praising Blumenauer’s bill to grant record tax deductions to companies in the regulated marijuana industry, noting that many companies are struggling under high taxes and regulatory fees, as well as competition from The well-established underground cannabis market.
“NORML commends the sponsors of this legislation for their efforts to end unfair federal taxation of state-regulated licensed cannabis businesses across the country,” said Morgan Fox, NORML’s political director, in a statement from the group. “Allowing them to have access to the same federal tax cuts that most other companies enjoy will facilitate new opportunities in the legal cannabis industry and make it more competitive with the unregulated market, which will directly benefit consumer health and public safety.”
“The two biggest challenges that cannabis entrepreneurs currently face are lack of access to capital and unfair tax burdens,” said Savera Gallup, executive director of the National Cannabis Roundtable. “By eliminating the impact of 280E on state legal cannabis operations, Congress will give these businesses, including small operators and minorities, the opportunity to stay financially viable and reinvest in their businesses, communities, and workforce through tax breaks and rebates that are routinely provided to other local industries.” This relief is critical to an industry that employs hundreds of thousands of American workers and generates billions of dollars in annual state and federal taxes — albeit without access to traditional financial resources.”
A push to eliminate the effect of 280E is also underway in cannabis-legal states, many of which use federal tax law as the basis for state tax rules. So far, 19 states have separated their tax laws from 280E, with moves continuing in other states including ConnecticutThe legislature is currently considering such a measure. McCann, PhD, co-founder and chief scientific officer of cannabis business consulting firm CannDelta Inc. , with efforts to get rid of the Section 280E rule statewide.
McCann wrote in an email to: High times. “Failure to do so will inevitably bankrupt many, which will likely help the illicit market continue to thrive as it did before legalization.”