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Senators Could Vote On These Marijuana Tax Amendments This Week

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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.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 20-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

Politics

White House Completes Review Of CBD Guidance From FDA

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The White House recently completed its review of pending Food and Drug Administration (FDA) guidance on marijuana and CBD research—though it remains to be seen whether the draft document will ultimately be released to the public.

FDA submitted its proposed plan—titled “Cannabis and Cannabis-Derived Compounds: Quality Considerations for Clinical Research”—to the Office of Management and Budget (OMB) in May. Few details are known about its contents, but an FDA spokesperson previously told Marijuana Moment that it could inform the agency’s approach to developing regulations for the marketing of CBD.

OMB finished its review last week, as first reported by InsideHealthPolicy. This comes days after a spending bill for FDA was released that includes a provision providing “funding to develop a framework for regulating CBD products.”

Despite the review being finalized, however, an FDA representative told Marijuana Moment on Friday that the agency “cannot provide an update of when (or even if) this guidance will issue.”

“It will be announced via the Federal Register should it move to publication,” they said.

It’s not entirely clear why the guidance wouldn’t be published in the end, but it may take some time for FDA to implement any edits suggested by the White House over the past month, and it’s possible there are additional layers of review beyond OMB that could determine when and whether it will be finalized.

It also remains to be seen whether FDA plans to wait for this specific guidance to be finalized and for the resulting research to be completed before it gets around to issuing final rules for CBD products in general. Stakeholders have been eagerly awaiting those regulations so they can fully take advantage of the legalization of hemp and its derivatives.

Former FDA Commissioner Scott Gottlieb said in May that White House policies requiring OMB to review scientific documents in the first place represent an onerous step that’s delayed the issuance of guidance.

Beyond sending the draft research plan to the White House for review, FDA is also soliciting public input about the safety and efficacy of CBD in comment period it has decided to keep open indefinitely. The agency said in an update to Congress in March that it has several specific questions it wants answered before deciding whether the cannabidiol can be lawfully marketed. That includes questions about the impact of different methods of consumption and drug interactions.

This week, FDA submitted a report to Congress on the state of the CBD marketplace, and the document outlines studies the agency has performed on the contents and quality of cannabis-derived products that it has tested over the past six years.

In the meantime, FDA is maintaining enforcement discretion when it comes to action against companies that sell CBD products regardless of the lack of regulations and has said it is currently targeting sellers that make especially outlandish or unsanctioned claims about the therapeutic value of their products.

It sent a warning letter to a CBD company owned by a former NFL player after advertisements it displayed suggested its products could treat and prevent a coronavirus infection, for example.

FDA sent a letter warning to a company about its marketing of injectable CBD products that led to a voluntary recall in May.

The agency also publicized a voluntary recall of another CBD product from a different company, notifying consumers about potentially high levels of lead in a batch of tinctures.

FDA has previously issued warnings to other CBD companies that have made unsubstantiated claims about the therapeutic potential of their products.

Veterans Working In Marijuana Industry Aren’t Automatically Blocked From Home Loans, VA Says

Photo by Kimzy Nanney.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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Veterans Working In Marijuana Industry Aren’t Automatically Blocked From Home Loans, VA Says

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The U.S. Department of Veterans Affairs (VA) recently clarified to Congress that it does not have a policy automatically barring veterans from receiving home loans solely because they work in the marijuana industry—and now a key House committee is asking the department to better communicate that to lenders and would-be borrowers.

For the past year, Rep. Katherine Clark (D-MA) and other lawmakers have been pressing VA on difficulties some veterans have faced in securing the benefit, with at least one constituent telling Clark that they were denied a home loan because of their work in the state-legal cannabis market. That prompted the congresswoman to circulate a sign-on letter and introduce an amendment to resolve the problem.

However, in a report submitted to Congress last month that was obtained by Marijuana Moment, VA said there is no policy on the books that calls for home loan denials due to employment at a cannabis business. Instead, the department clarified that conflicting state and federal laws makes it “difficult to prove the stability and reliability of cannabis-derived income,” which are key factors in determining loan eligibility.

“VA is committed to working diligently to serve our Nation’s Veterans by providing eligible Veterans with home loan guaranty benefits,” VA said. “There is nothing in VA statutes or regulations that specifically prohibits a Veteran whose income is derived from state-legalized cannabis activities from obtaining a certificate of eligibility for VA home loan benefits. However, given the disparity between Federal and State laws on cannabis, determining whether such a Veteran is able to obtain a loan has become a complex issue.”

A person’s “reliance on [marijuana-derived] income may hinder a Veteran’s ability to obtain a VA-guaranteed home loan, a result that is consistent with other federal housing programs,” the report states. “VA also notes that many lenders have established their own income thresholds and policies on overlays, which are often more stringent than VA’s requirements, to ensure that the VA-guaranteed loan will be purchased by an investor in the secondary mortgage market.”

In other words, individual lending companies may be denying home loans to veterans because the cannabis industry-derived income they would use to pay back loans isn’t necessarily stable and reliable due to the fact that federal officials could shut down their employers at any time.

If that’s the case, then it doesn’t appear it would be necessary to pass legislation targeting the narrow issue in the way lawmakers did last year. Clark’s amendment to address the problem was approved by the House as part of a defense spending bill—though leaders in the chamber agreed to scrap it after the Senate didn’t include it in its version of the legislation.

The House Appropriations Committee also approved report language last year attached to the bill that funds VA expressing concern that the department “has never publicly stated its position on this matter, hindering Veterans’ ability to fully understand and consider how employment decisions could affect future eligibility for earned benefits.”

The newly released explanation from VA is a result of that provision.

Now, for the next fiscal year, a new report attached to the latest Military Construction, Veterans Affairs, and Related Agencies spending bill acknowledges VA’s recent policy clarification—but lawmakers are asking the department to do more.

“The Committee understands that as directed by House Report 116–63, VA has clarified that nothing in VA statutes or regulations specifically prohibits a Veteran whose income is derived from state-legalized cannabis activities from obtaining a certificate of eligibility for VA home loan benefits,” the report states. “The Committee directs the VA to improve communication with eligible lending institutions to reduce confusion among lenders and borrowers on this matter.”

Clark told Marijuana Moment that “no veteran should be denied benefits simply because they work within the legal cannabis industry.”

“This must be crystal clear in our laws and communicated directly to both borrowers and lenders,” the congresswoman said. “By including this language, we’re eliminating any doubt about the rights of our service members and protecting their ability to access what they’ve rightfully earned.”

In other veterans and cannabis news this year, the Congressional Budget Office released an analysis on a marijuana research bill for veterans and determined that it would have no fiscal impact. And a federal commission issued recommendations to promote research into the therapeutic potential of both cannabis and psychedelics such as psilocybin mushrooms and MDMA.

Read VA’s report on its home loan policy for veterans working in the marijuana industry below:

VA Response On Home Loans F… by Marijuana Moment on Scribd

FDA Updates Congress On CBD Product Labelling Accuracy

Photo courtesy of Mike Latimer.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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Idaho Medical Marijuana Activists Ask State For Electronic Signature Gathering Option Following Court Ruling

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Idaho activists have formally requested that the state allow them to collect signatures electronically for a medical cannabis legalization initiative following a series of federal court rulings on the issue in a case filed by a separate campaign.

While the signature submission deadline passed in May, advocates for an education funding campaign filed a suit against the secretary of state, arguing that social distancing restrictions that were put in place due to the coronavirus pandemic meant the state should give them more time to digitally petition. The judge agreed and ordered the state to allow them to do so for 48 days starting Thursday.

The marijuana reform campaign feels that the same relief should be extended to them as well, and an attorney representing the group sent a letter to the secretary of state this week, asking that the Elections Division also provide cannabis activists with the digital petitioning and deadline extension concessions that the federal judge granted to the education funding group.

In one of the latest developments, the state’s request to the U.S. Court of Appeals for the Ninth Circuit to temporarily force the suspension of electronic signature gathering was denied on Thursday, though the appeal on the broader case is ongoing. That’s given the cannabis activists more hope as they pursue legal routes to have the lower court’s ruling apply to them.

Russ Belville, campaign spokesperson for the Idaho Cannabis Coalition, told Marijuana Moment that the group was “thrilled” to see the appeals court refuse to stay the electronic signature gathering decision.

“Our attorneys are working to convince the state to provide our Idaho Medical Marijuana Act petition the same electronic signature gathering relief, as we have suffered the same infringement of our petitioning rights,” he said. “It’s a shame it takes a pandemic to even consider allowing electronic signatures on petitions. Idaho should make every effort to make exercising our rights as easy as possible, especially for sick, disabled, elderly, infirm and rural folks without easy access to an in-person petitioner.”

In the new letter to Idaho Secretary of State Lawerence Denney, attorney Bradley Dixon said his client “has standing to pursue a remedy given the impact that the COVID-19 restrictions have had upon it.” The campaign “can show (1) they have suffered an injury in fact, which is both concrete and particularized, and actual or imminent; (2) their injury is fairly traceable; and (3) their injury will likely be redressed by a favorable outcome.”

“Moreover, just like Reclaim Idaho, as illustrated above, our client can show that it was diligent in collecting signatures and had adopted a thorough plan to achieve ballot success in advance of the unforeseeable coronavirus outbreak. Considering the merits of a possible case, our client’s First and Fourteenth Amendments rights have been harmed because the State of Idaho and its agents did not provide an alternative means to signature collection during the stay at home order, or during any of the phased reopening stages.”

The state’s stay-at-home order “made it impossible to retrieve all statutorily-required signatures because of both the reduction in time to collect such signatures, and the deadline date to obtain signatures falling on the same day as the end of the stay at home order,” the attorney said.

If the campaign is ultimately allowed to proceed with signature gathering, they will need 55,057 valid signatures to qualify for the November ballot. Activists said they have about 45,000 unverified signatures on hand at this point, and they’re confident that can fill the gap if they get the deadline extension and electronic petitioning option.

The group has indicated it is prepared to seek relief directly from the courts if the secretary of state does not comply with their request to his office.

Under the proposed ballot measure, patients with qualifying conditions could receive medical cannabis recommendations from physicians and then possess up to four ounces of marijuana and grow up to six plants.

Advocates say that passing medical cannabis in one of the remaining states without such policies on the books would be a significant victory for patients in its own right—but it could also have outsized federal implications. A House-passed bill to protect banks that service state-legal cannabis businesses from being penalized by federal regulators is currently pending action in a Senate committee chaired by a senator who represents the state.

Creating a medical marijuana program in Idaho, which is one of small handful of states that don’t yet even have limited CBD laws, could put additional pressure on Senate Banking Committee Chairman Mike Crapo (R-ID) to move the financial services legislation in Congress.

Read the letter to the secretary state on allowing electronic signature gathering for medical marijuana below:

Idaho Secretary of State Re… by Marijuana Moment on Scribd

Oregon Voters Will Decide On Legalizing Psilocybin Therapy In November, State Announces

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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