U.S. senators are expected to consider two far-reaching marijuana amendments to a broad Republican-led tax bill being debated on the floor this week. Both measures are sponsored by GOP Sen. Cory Gardner of Colorado, and they concern the ability state-legal cannabis businesses to take tax deductions that are available to operators in other industries.
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.
The full text of both of Gardner’s measures are included below.
See Marijuana Moment’s earlier report on Gardner’s cannabis tax advocacy for background and context.
Gardner’s first amendment provides a simple exemption to the provision known as 280E for marijuana businesses that are operating in accordance with state laws:
______ SA 1609. Mr. GARDNER submitted an amendment intended to be proposed by him to the bill H.R. 1, to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018; which was ordered to lie on the table; as follows: At the end of part IV of subtitle C of title I, add the following: SEC. 13311. ALLOWANCE OF DEDUCTIONS AND CREDITS RELATING TO EXPENDITURES IN CONNECTION WITH MARIJUANA SALES CONDUCTED IN COMPLIANCE WITH STATE LAW. (a) In General.--Section 280E is amended by inserting before the period at the end the following: ``, unless such trade or business consists of marijuana sales conducted in compliance with State law''. (b) Effective Date.--The amendment made by this section shall apply with respect to taxable years ending after the date of the enactment of this Act. ______
Gardner’s second amendment is more complicated. It also provides the 280E fix for state-legal cannabis businesses, but requires that they meet a certain definition of “properly regulated” in order to qualify for the exemption:
______ SA 1639. Mr. GARDNER submitted an amendment intended to be proposed to amendment SA 1618 proposed by Mr. McConnell (for Mr. Hatch (for himself and Ms. Murkowski)) to the bill H.R. 1, to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018; which was ordered to lie on the table; as follows: At the appropriate place, insert the following: SEC. __. EXCEPTION FOR EXPENDITURES IN CONNECTION WITH CERTAIN CANNABIS RELATED TRADES OR BUSINESSES. (a) In General.--Section 280E of the Internal Revenue Code of 1986 is amended-- (1) by striking ``drugs'' and all that follows through ``No deduction'' and inserting ``drugs ``(a) General Rule.--Except as provided in subsection (b), no deduction''; and (2) by adding at the end the following: ``(b) Exception for Certain Cannabis Related Trades or Businesses.-- ``(1) Exclusion from trafficking.--Those activities undertaken in connection with a qualified cannabis trade or business shall not be considered trafficking in controlled substances for purposes of subsection (a). ``(2) Definitions.--For purposes of this subsection: ``(A) Cannabis related trade or business.--The term `cannabis related trade or business' means a trade or business that earns cannabis related income. ``(B) Cannabis related income.--The term `cannabis related income' means any income earned from the manufacture, production, cultivation, processing, refinement, transportation and delivery, distribution, testing, use, sale, or exchange of cannabis or cannabis-derived materials. ``(C) Qualified cannabis related trade or business.--The term `qualified cannabis related trade or business' means a cannabis related trade or business that meets the following requirements: ``(i) The activities giving rise to the cannabis related income of the trade or business are properly regulated under the laws of the State in which they are conducted. ``(ii) No cannabis or cannabis-derived materials owned by the trade or business are sold, exchanged, provided free of charge, gifted, donated, sampled, embedded in the sale of another item, embedded within the provision of a service, or otherwise transferred in a manner that does not give rise to cannabis related income. ``(iii) None of the activities of the trade or business are trafficking in controlled substances other than cannabis or cannabis-derived materials regulated under State law. ``(iv) To the extent that the cannabis related trade or business was in existence prior to the date of enactment of this subsection, the person who held or controlled a license described in paragraph (3)(A) in taxable years ending before such date of enactment has not had a cannabis license revoked by State licensing authorities. ``(3) Properly regulated.--The term `properly regulated' means, with respect to a qualified cannabis related trade or business, the following: ``(A) Persons engaged in the activities giving rise to the cannabis related gross receipts are licensed by the State in which they conduct such activities and such license is subject to periodic renewal. ``(B) State licensing rules impose limitations on the production and distribution of cannabis and items derived from cannabis. ``(C) State licensing rules restrict the distribution of cannabis and items derived from cannabis to minors, including-- ``(i) a minimum age on legal purchases of 18; and ``(ii) restrictions on advertising, marketing ,and promotional activities that are at least as stringent as those imposed on alcohol products in the State. ``(D) Sufficient books and records are employed by the cannabis related trade or business-- ``(i) to enable the seed to sale identification of all the cannabis or cannabis derived materials owned or used in connection with the manufacturing, production, growth, processing, refinement, distribution, testing, use, sale, or exchange activities of the cannabis related trade or business; and ``(ii) to enable the association of the income of the cannabis trade or business with the cannabis or cannabis derived materials identified in accordance with clause (i). ``(E) Personal use exemptions to the State licensing requirements, if any, contain limitations similar to those contained in section 5053(e), applied-- ``(i) by limiting the definition of any permissible transfer to another person, whether by sale, exchange, gift, sharing, concurrent use, or otherwise, to transfers between the persons who constitute family members within the meaning of section 267(c)(4) and who are not minors; and ``(ii) by substituting 8 plants for 200 gallons in each place it appears for applying a household limitation involving more than 1 adult and 4 plants for 100 gallons in each place it appears for applying a household limitation involving only 1 adult. ``(F) State licensing rules limit caregiver, agency, designation arrangements, cooperative agreements, or any other arrangement involving cannabis or cannabis derived materials purporting not to involve a trade or business to 8 plants per patient or person per calendar year. ``(4) Application to persons engaged in more than one trade or business.--The activities of all persons who are related parties within the meaning of section 52 shall be taken into account in applying this subsection.''. (b) Effective Date.--The amendments made by this section shall apply with respect to taxable years ending after the date of the enactment of this Act. ______
One or both of the Gardner amendments are expected to be considered as part of a so-called “vote-a-rama” on the Senate floor late Thursday or on Friday.
GOP Congressman: Legal Marijuana Has “Possibility To Create Jobs”
Legalizing marijuana might be a way to help lift rural areas of Virginia out of poverty, a Republican who represents part of the state in Congress says.
“The lands out in Southwest are conducive to be able to grow that for medicinal purposes, or whatever it is, for other research purposes, and even recreational use for some areas, if Virginia chooses to legalize it in that way,” Congressman Scott Taylor said on Wednesday. “And if Virginia goes that way I think there is the possibility to create jobs down in the Southwest.”
Taylor, who was answering a caller’s question during an appearance on C-SPAN’s Washington Journal, added that he supports letting states set their own cannabis laws without federal interference.
“I think we should decriminalize it and leave it up to the states,” he said. “I do believe it’s a state decision, not a federal decision.”
Taylor, a freshman member of Congress, is a cosponsor of a pending House bill to remove marijuana from the Controlled Substances Act.
“When I was in the state House we voted to legalize industrial hemp, which is also another product that would grow well in Southwest just as tobacco did,” Taylor added. “So I think there’s product there.”
Advocates believe that Virginia has a good chance of decriminalizing cannabis in 2018. Incoming Gov. Ralph Northam, A Democrat, spoke often about cannabis on the campaign trail, consistently describing criminalization’s impact in stark racial justice terms.
Republican Senate Majority Leader Tommy Norment has announced he will file a decriminalization bill when the new legislative session begins in January.
Vermont Will Legalize Marijuana Within Weeks, Officials Indicate
Vermont appears poised to become the next state to legalize marijuana. And, according to top elected officials, it is likely to do so within a matter of weeks.
Last week, House Speaker Mitzi Johnson, a Democrat, said she expects “it likely will pass in early January.” Days earlier, Gov. Phil Scott, a Republican, said he is “comfortable” signing a cannabis legalization bill into law in early 2018. And on Thursday, Senate President Pro Tempore Tim Ashe, a member of the Progressive Party, said he and his colleagues “look forward to working with the governor to make sure that that bill gets to the finish line.”
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Photo courtesy of M a n u e l.
Here’s What Jeff Sessions Discussed In Secret With Anti-Marijuana Activists
Last week, U.S. Attorney General Jeff Sessions held a behind-closed-doors meeting about marijuana with anti-legalization activists.
Now, thanks to the fact that Sessions inadvertently showed an agenda for the meeting to a TV camera that was in the room to capture introductions — along with some high-tech sleuthing — we know what the prohibitionists discussed in secret after reporters were kicked out.
A Twitter user with the handle @MentalMocean was able to enhance a screen capture of the document that Marijuana Moment posted.
The document appears to read:
Bertha Madras: Marijuana is not a substitute for opiates as a pain medication.
Dr. Hoover Adger: The harm from today’s marijuana.
Dr. Bob DuPont: The effect of marijuana on drugged driving.
David Evans: The role that the Food and Drug Administration can and should [obscured]
[obscured] The organizations you can speak for and what you and they are [obscured] people from recreational marijuana use.
[obscured] law enforcement thinks of the commercialization of [obscured] law enforcement would support an enforcement initiative.
[obscured] course of marijuana commercialization in the states if the [obscured] not intervene.
The enhanced photo makes clear that the anti-legalization activists made a concerted pitch during meeting to convince Sessions to launch a federal crackdown on states that have ended cannabis prohibition.
Can any tech wizards enhance this screen grab of an agenda that Jeff Sessions was holding before the start of a drug policy meeting today? pic.twitter.com/7FLvjj1AZd
— Tom Angell 🌳📰 (@tomangell) December 8, 2017
— Sam Gold (@MentalMocean) December 13, 2017
In attendance, according to video of the opening introductions captured by a pool photographer and posted by C-SPAN, were:
- Edwin Meese III, U.S. attorney general under the Reagan administration
- Kevin Sabet, president and CEO of Smart Approaches to Marijuana
- Bertha Madras, a former Office of National Drug Control Policy staffer and a member of President Trump’s Commission on Combating Drug Addiction and the Opioid Crisis
- Robert DuPont, former director of the National Institute on Drug Abuse
- David Evans, executive director of the Drug Free Schools Coalition
- Dr. Hoover Adger, Johns Hopkins Hospital
“I think it’s a big issue for America, for the country, and I’m of the general view that this is not a healthy substance,” Sessions said at the beginning of the gathering. “I think that’s pretty clear. And then have the policy response that we and the federal government needs to be prepared to take and do so appropriately and with good sense.”
“I appreciate the opportunity to hear your analysis on marijuana and some of the related issues,” Sessions told the group. “I do believe, and I’m afraid, that the public is not properly educated on some of the issues related to marijuana. And that would be a matter that we could, all of us together, maybe be helpful in working on and that would allow better policy to actually be enacted.”
The group’s roundtable discussion itself, which took place after initial introductions, was closed to the press.
The gathering comes as the Justice Department’s overall position on marijuana policy remains uncertain. Sessions has in recent weeks sent mixed signals about his plans for federal marijuana enforcement under the Trump administration.
Last month, he testified before Congress that an Obama-era Justice Department memo that generally allows states to implement their own marijuana laws without interference remains in effect. But he separately told reporters at a briefing that his department is actively conducting talks about potential changes to the policy.
Photo courtesy of Gage Skidmore.
Politics2 months ago
This Obscure 45-Year-Old Federal Law Exempts State-Legal Marijuana
Politics2 weeks ago
Trump Administration Considering Marijuana Policy Changes, Sessions Says
Politics2 months ago
Former Surgeon General: Legalize Marijuana; Decrim Not Good Enough
Politics2 months ago
These States Will Probably Vote On Marijuana In 2018
Politics2 months ago
FDA To Review Medical Claims About Marijuana
Politics2 months ago
Marijuana Is A Big Issue In Next Month’s Elections
Politics3 weeks ago
New Sessions Memo: Does It Impact Marijuana?
Science & Health2 months ago
Psychologists Group Slams Barriers To Marijuana Research