Connect with us

Business

Marijuana Businesses Don’t See 280E Reform Success, But There’s Still Hope

Published

on

Fairness. That’s what marijuana businesses say they’re seeking to win as part of a broad Republican tax reform plan moving through Congress this month.

To date, they haven’t had much luck, but that doesn’t mean the fight is over.

Under a 1980s federal provision — known as 280E — cannabis businesses are forced to pay a much higher tax rate than companies in other industries.

The statute was originally intended to to stop drug cartel leaders from writing off yachts and expensive cars, but today its plain language means that that growers, processors and sellers of marijuana — which is still a Schedule I substance under federal law — can’t take business expense deductions that are available to operators in other sectors.

Last week, those businesses could not get any member of the House Ways and Means Committee to introduce — never mind muster enough bipartisan support to pass — an amendment attaching a 280E fix to the tax overhaul bill. Amendments on other topics were adopted or rejected on party-line votes.

The legislation was then approved, with all Republicans in support and all Democrats in opposition, and sent to the House Rules Committee to make preparations for a floor vote.

On Tuesday, Congressman Jared Polis (D-CO) did file a 280E amendment in the Rules panel, intended for floor consideration. He described the proposal as “essentially revenue neutral” in comments before the committee, of which he is a member.

Referring to the up to 70 percent effective tax rate that legal cannabis businesses are forced to pay because they cannot take expense deductions, Polis said 280E makes their prices artificially high and “prevents them from being able to completely undermine the criminal cartels” because those organizations can sometimes undercut legal prices.

Repealing the outdated provision would be the “nail in the coffin of the criminal cartels that jeopardize the health of our kids and our safety,” he said.

But the panel, as expected, did not allow the measure to advance before the full House, as has been the case with every marijuana amendment over the course of the past year.

What’s more, the panel advanced the tax bill under a “closed rule” that blocked all 139 submitted amendments on a broad range of topics from reaching the floor.

(One of those additional measures, by Congressman Lou Correa (D-CA) would establish a 15 percent federal excise tax on legal marijuana sales with revenue earmarked toward reducing the deficit.)

Polis’s motion to amend the rule to specifically allow the 280E measure to be considered on the floor failed on a party-line vote of three to eight.

The tax bill will now go before the full House later this week where it is expected to be narrowly approved.

In the meantime, advocates are hanging their hopes on the Senate, where the Finance Committee is marking up its version of the tax reform legislation this week.

Get access to this exclusive analysis for Marijuana Moment Patreon supporters that spells out which senators cannabis interests need to win over in order to approve a 280E amendment in committee. A sufficient number of GOP members of the Senate Finance Committee have supported marijuana measures in the past to put 280E reform within reach.

How Marijuana Businesses Can Win Tax Fairness Under Trump Plan

A total of 355 amendments have been filed before that panel.

While none are listed as explicitly dealing with 280E, the legislative text for the measures hasn’t been posted online, and one amendment in particular from Sen. Ron Wyden (R-OR) is described in a fashion that seems as though it may concern the marijuana tax provision: “Amendment of a perfecting nature to help small business.”

Wyden is the sponsor of a standalone 280E reform bill similarly titled, “The Small Business Tax Equity Act of 2017.”

Advocates have had success garnering increasing bipartisan support for that bill and standalone 280E reform legislation in the House this year as compared to versions filed in the past Congress. But those bills are not going to move though committee, to the floor and to the president.

The only real hope of getting a reform enacted into law is to attach it to a broader moving vehicle like the GOP tax bill.

And now, because of the failure to approve a 280E amendment on the House side, the only hope lies in the Senate. That means either getting an amendment adopted in committee or on the floor.

The latter will be a much harder path because the bill will likely be considered by the full body under an agreement that limits the number of amendments, and Senate Democratic leaders are likely to focus their efforts on measures concerning middle-class tax relief and general tax rates for businesses.

While convincing Senate Republicans to amend their leadership’s important bill in committee is a big ask, it is seen as not nearly as heavy a lift as convincing House GOP members to vote to change the bill in their chamber would have been.

So now, industry interests are hoping that Wyden’s amendment is about 280E, that he can hold all the Democrats on the panel in support of it and that a select number of targeted Republicans will go along with the plan.

Find out which senators cannabis businesses need to target to win a 280E reform amendment in the Senate Finance Committee in this exclusive analysis for Marijuana Moment Patreon supporters:

How Marijuana Businesses Can Win Tax Fairness Under Trump Plan

Even if 280E language is adopted on the Senate side, it will still have to a survive a bicameral conference committee that merges the bill with the House version which does not contain the provision.

Wyden’s office and cannabis business advocacy interests active on Capitol Hill did not respond to queries from Marijuana Moment for this story.

Business

More Banks Welcome Marijuana Businesses, Federal Data Shows

Published

on

A steadily growing number of banks are willing to open accounts for marijuana businesses, according to new federal data.

Even as a string of conflicting signals from the Trump administration surrounds the debate about legalization with uncertainty, the number of depository institutions that are actively banking the cannabis industry has increased roughly 18% since the beginning of 2017.

Last January, 340 financial services providers were banking marijuana businesses. That number rose to 400 by the end of September, according to a report released late last month by the Financial Crimes Enforcement Network (FinCEN).

The rise comes despite continued confusion about the federal government’s approach to marijuana as U.S. Attorney General Jeff Sessions — a longtime legalization opponent — has made clear he is considering potential changes to the former administration’s mostly hands-off cannabis enforcement policies.

In 2014, the Obama administration’s Treasury and Justice Departments issued guidance to banks about how to serve the marijuana industry without running afoul of federal regulators. The policy, which requires financial institutions to regularly file reports on their cannabis customers, was intended to provide clarity and assurances to banks. But many have remained reluctant to work with marijuana businesses because of overarching federal prohibition laws.

Under a separate document — the so-called “Cole Memo,” named after the then-deputy attorney general who authored it in 2013 — the federal government set out certain criteria that, if followed, would allow states to implement their own laws mostly without intervention. Those areas concern priorities like preventing youth use, impaired driving and interstate trafficking.

While Sessions testified before Congress in November that the Obama-era guidance is still in effect, he later said that the Department of Justice is actively reviewing potential changes to the policy. He also held a closed-door meeting with anti-legalization activists last month.

Those developments are just the latest in a series of anti-cannabis signals sent by the attorney general over the course of the past year. Meanwhile, a number of anecdotal reports have emerged in recent months about individual cannabis business bank accounts being closed.

Umpqua Bank, for example, reportedly shut down the account of Greenbridge Corporate Counsel this fall after the law firm refused to turn over information about its cannabis clients without their permission.

But the new federal data shows that overall there has been a steady increase in the number of banks and credit unions willing to open accounts for marijuana-related businesses, even as Sessions has hinted that a cannabis crackdown could be in the works.

The new FinCEN report is part of a set of periodic releases in response to frequently requested data under the Freedom of Information Act.

Because of banks’ reluctance to work with marijuana businesses, many growers, processors and retailers operate on a cash-only basis, which can make them targets for robberies.

A growing bipartisan group of members of Congress has sought a legislative solution to the problem. House and Senate bills to provide permanent clarity to the banking industry about working with marijuana businesses have earned increasing cosponsor numbers, but haven’t been scheduled for hearings or votes.

In 2014, the House voted 231 to 192 in favor of an amendment to prevent federal authorities from punishing banks for servicing the legal marijuana industry. But the language was not included in the final version of annual appropriations legislation that year and was not enacted into law. Congressional Republican leaders have since prevented similar measures from even being considered for attachment to subsequent spending bills.

In November, the chair of the House Financial Services Committee used a procedural ruling to block a vote on a cannabis banking amendment offered to a bill on stress testing for financial institutions.

Meanwhile, a congressional budget rider that prevents the Justice Department from interfering with state medical cannabis laws is set to expire on January 19, barring an extension through a still-unresolved Fiscal Year 2018 spending package.

Legalization advocates believe that several more states will enact laws allowing recreational or medical use in 2018.

This piece was first published by Forbes.

Continue Reading

Business

GOP Senator Pulls Back Marijuana Tax Amendment

Published

on

Despite saying this week that he would offer an amendment to help marijuana businesses achieve tax fairness, Republican U.S. Sen. Cory Gardner of Colorado did not end up forcing colleagues to vote on the issue during consideration of a broad GOP-led tax reform bill.

As a result, the measure, which would have exempted cannabis growers and retailers who operate legally under state law from a federal penalty on illegal drug sellers, is not currently attached to a broad tax reform bill that Republicans are working to send to President Trump’s desk by the end of the year.

Following a lengthy session during which other members offered various amendments, the Senate approved the legislation on a largely party-line vote early Saturday morning with a margin of 51 to 49.

Gardner was unsure he had enough support in the chamber to approve the amendment in light of the $5 billion price tag that Congress’s Joint Committee on Taxation reportedly scored it with.

Because the tax bill was being considered under a budget reconciliation process that allowed Republicans to avoid a filibuster and advance the proposal with 51 votes instead of 60, the overall plan needed to avoid increasing the deficit by more than $1.5 trillion over the next decade.

Since Gardner’s measure, while focused on allowing marijuana operators to be taxed fairly like other businesses, would in effect amount to a cut from their current rates, it would reduce revenue and add to the deficit.

Nonetheless, conservative anti-tax group Americans for Tax Reform included the measure in a list of “key votes,” calling it “good tax policy.”

“Support for the legislation should not be conflated with support or opposition to legalizing cannabis,” the organization wrote. “Instead, this amendment is about ensuring the federal government does not use the tax code to discriminate against legal businesses.”

Under current federal law, a 1980s provision — section 280E of the Internal Revenue Code — effectively forces cannabis businesses to pay a much higher tax rate than other companies.

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

The statute was originally intended to to stop drug cartel leaders from writing off yachts and expensive cars, but today its language means that that state-licensed growers, processors and sellers of marijuana — which is still a Schedule I substance under federal law — can’t take business expense deductions that are available to operators in other sectors.

As a result, cannabis businesses often pay an effective tax rate upwards of 65-75 percent, compared with a normal rate of around 15-30 percent.

“Our current tax code puts thousands of legal marijuana businesses throughout Colorado at a disadvantage by treating them differently than other businesses across the state,” Gardner said in a press release upon cosponsoring a standalone bill to reform the provision last month. “Coloradans made their voices heard in 2012 when they legalized marijuana and it’s time for the federal government to allow Colorado businesses to compete. This commonsense, bipartisan bill will allow small businesses in Colorado and other states that have legal marijuana businesses to grow their operations, create jobs, and boost the economy.”

The marijuana reform provision was also not included in the version of the tax legislation recently passed by the House, where that chamber’s Rules Committee blocked floor consideration of an amendment on the issue two weeks ago.

Now, a bicameral conference committee will hammer out the overall differences between the two chambers’ bills into a single proposal that can be sent to the president. It is technically possible that the cannabis amendment could still be inserted in conference, though it would be unusual for congressional leaders to attach a provision that wasn’t approved by either chamber and which concerns a still fairly controversial issue like marijuana.

standalone House bill to shield state-legal marijuana businesses from 280E has 40 cosponsors. The companion Senate legislation has six cosponsors.

Continue Reading

Business

GOP Senator Wants Tax Cut For Marijuana Businesses

Published

on

A Republican senator from a state where marijuana is legal is pushing this week to give cannabis businesses a measure of tax fairness.

Sen. Cory Gardner of Colorado wants to attach an amendment to a wide-ranging Republican-led tax reform bill that would allow state-legal marijuana growers, processors and sellers to deduct normal businesses expenses from their taxes, just like operators in other industries can.

Under current federal law, a 1980s provision — known as 280E — effectively forces cannabis businesses to pay a much higher tax rate than other companies.

The statute was originally intended to to stop drug cartel leaders from writing off yachts and expensive cars, but today its language means that that growers, processors and sellers of marijuana — which is still a Schedule I substance under federal law — can’t take business expense deductions that are available to operators in other sectors.

As a result, cannabis businesses often pay an effective tax rate upwards of 65-75 percent, compared with a normal rate of around 15-30 percent.

Gardner’s press secretary said in an email that “he plans to file an amendment” to the broader tax legislation this week to include a 280E fix so that the provision no longer applies to marijuana businesses that operate in accordance with state or local laws.

The senator also cosponsored a standalone bill to reform the provision this month.

“Our current tax code puts thousands of legal marijuana businesses throughout Colorado at a disadvantage by treating them differently than other businesses across the state,” he said in a press release about the bill. “Coloradans made their voices heard in 2012 when they legalized marijuana and it’s time for the federal government to allow Colorado businesses to compete. This commonsense, bipartisan bill will allow small businesses in Colorado and other states that have legal marijuana businesses to grow their operations, create jobs, and boost the economy.”

Marijuana businesses and their supporters failed to attach 280E reform language to the House version of the tax legislation this month. In that chamber, the Rules Committee blocked floor consideration of an amendment on the issue two weeks ago.

“When Congress passed 280E, they never envisioned an industry like ours meant to take ill-gotten gains from drug dealers,” Neal Levine, chairman of the New Federalism Fund, said in an interview. “The provision is misapplied to our industry. It’s actually helping the drug cartels it was meant to hurt,” he said, referring to the fact that extra taxes force legal providers to keep prices artificially high such that they sometimes can’t compete with the illegal market.

Levine’s group and others have been working to convince members of Congress to reform the provision, emphasizing that it’s not a pro-marijuana idea.

“Our industry is actually the only folks who have been able to take market share from the drug cartels,” he said.

Gardner mentioned the plan to attach the amendment to the tax bill to a Bloomberg reporter earlier this week.

The tax bill is currently on the Senate floor, and leaders are aiming to pass it before they go home for the weekend.

Even if 280E language is adopted on the Senate floor, in order to be enacted into law it will have to a survive a bicameral conference committee that merges the chamber’s bill with the House version that does not contain the provision.

In other financial legislative news of interest to the cannabis industry, House leaders also prevented consideration of an amendment to allow marijuana businesses to access banks this month.

This piece was originally published by Forbes.

(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)

Continue Reading
Advertisement

Stay Up To The Moment

Marijuana News
In Your Inbox

Support Marijuana Moment

Trending