A congressman introduced a bill on Friday that would create a variety of programs and grants to help people enter the hemp industry and build their businesses. It would also require a federal study into potential alternative uses for the crop as well as challenges faced by the market.
Rep. Denver Riggleman (R-VA) filed the Hemp Opportunity Zone Act. As the title implies, the main component of the legislation clarifies that farmers who cultivate the crop can receive tax benefits if they operate in an area designated as an “opportunity zone” by the Treasury Department.
Opportunity zones are census-designated low-income areas that are considered economically distressed. The governor of a state can make the designation, and Treasury then decides whether to certify it. The program is designed to promote investments in communities that might typically be overlooked by allowing investors to defer capital gains taxes if they put money into an opportunity zone business.
“We are reviewing the legislation now, but if it indeed serves to open up investment in hard-hit farming and small business communities, it would be welcome relief for an industry that has been struggling through the COVID pandemic and federal burdens imposed by FDA, USDA and now the DEA,” Jonathan Miller, general counsel for the U.S. Hemp Roundtable, told Marijuana Moment.
Treasury Sec. Steven Mnuchin earlier this year weighed in on eligibility for the opportunity zone program with respect to the marijuana industry and said “it is not the intent of the opportunity zones that if there is this conflict [between state and federal marijuana laws] that has not been cleared that, for now, we should not have those businesses in the opportunity zones.”
In addition to clarifying eligibility for hemp-focused businesses, Riggleman’s new bill would also create a “hemp farmer start-up tax credit” equal to 10 percent of the cash rent paid for land used for production or 15 percent of the “crop share rent so paid by the taxpayer.” To be eligible, farmers would need to have less than $25 million in gross receipts for the last taxable year.
The Hemp Opportunity Zone Act is a huge win for farmers in #VA05. Hemp farming is a new and thriving industry. By providing these tax incentives hemp growers in Virginia and the 5th District are primed to lead based on their historic production of tobacco. https://t.co/LncEw7SQsS
— Congressman Denver Riggleman (@RepRiggleman) August 29, 2020
The legislation would further establish a “small hemp farmer credit” that would enable businesses with less than $250,000 in gross receipts for the previous taxable year to obtain a credit “equal to 30 percent of the basis of hemp farming property placed in service.”
“Hemp farming is a new and thriving industry,” Riggleman, who lost his primary renomination bid this year and only has a few months left in Congress, said. “By providing these tax incentives hemp growers in Virginia and the 5th District are primed to lead based on their historic production of tobacco.”
He said that expanding opportunity zone eligibility to the market “will incentivize investments into long neglected neighborhoods that will spur economic growth and combat poverty.”
Finally, the bill also calls on the Treasury Department to work with the U.S. Department of Agriculture (USDA) on a study of the hemp industry.
The report would look at opportunities to use hemp seeds in animal feed, the potential use of hemp products as protective equipment for medical workers and first responders and the “feasibility” of certain USDA regulations for the market.
Certain questions the study would address concern complaints industry stakeholders have made about USDA’s interim final rule for the crop. Treasury and USDA would have to consider the department’s hemp sampling requirements and its 0.3 THC limit for the crop.
The agencies would also have to explore how the U.S. competes “globally with other countries that have a 1.0 percent THC limitation.” The bill states that the study should additionally consider the potential benefits of including hemp-based food items in “certain public school meal plans” and whether any items used by the federal government or its contractors “can be substituted by a hemp-based product.”
Several of those areas of study were addressed in a bill introduced by Rep. Tulsi Gabbard (D-HI) last year.
Meanwhile, several lawmakers have recently implored USDA to delay the implementation of its proposed hemp rules, citing concerns about certain restrictive policies the agency has put forward in its draft regulations.
Senate Minority Leader Chuck Schumer (D-NY) earlier this month wrote to Agriculture Secretary Sonny Perdue, similarly asking that USDA delay issuing final regulations for the crop until 2022 and allow states to continue operating under the 2014 Farm Bill hemp pilot program in the meantime.
As it stands, the earlier pilot program is set to expire on October 31. The minority leader isn’t alone in requesting an extension, as state agriculture departments and a major hemp industry group made a similar request to both Congress and USDA this month.
As USDA works to finalize their regulations, which they intend to complete by October 2021, the department has been systematically approving hemp plans proposed by individual states, territories and tribes. The most recent approvals were for Maryland and the Lower Sioux Indian Community.
Six states that submitted hemp regulatory plans to USDA are being asked to make revisions and resubmit before they’re approved.
Read the text of the Hemp Opportunity Zone Act below:
Photo courtesy of Brendan Cleak.