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Repealing the outdated provision would be the “nail in the coffin of the criminal cartels that jeopardize the health of our kids and our safety,” he said.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