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 Falsely Claims Marijuana Can Be Legally Consumed In Public In ‘Many States’
A Republican congressman wrongly claimed that marijuana can be legally consumed in public in “many states” in a Twitter post on Friday.
Following a House vote in favor of anti-vaping legislation that also included a ban on menthol cigarettes, Rep. Andy Barr (R-KY) argued that the bill is an example of government overreach and that it would not prevent youth from using vaping products.
“Now, Democrats propose making possession of a menthol cigarette a violation of federal law when smoking a marijuana joint in public is legal in many states,” he wrote in his tweet. “Instead, we need to focus on real healthcare issues like surprise billing, the opioid epidemic and curbing coronavirus.”
Now, Democrats propose making possession of a menthol cigarette a violation of federal law when smoking a marijuana joint in public is legal in many states. Instead, we need to focus on real healthcare issues like surprise billing, the opioid epidemic and curbing coronavirus.
— Rep. Andy Barr (@RepAndyBarr) February 28, 2020
The claim about laws governing public cannabis consumption is likely to raise eyebrows among reform advocates familiar with state-legal marijuana programs.
It’s not the case that “many states” allow individuals to smoke in public areas. In fact, it’s one of the most commonly prohibited activities in legalization measures.
“Rep. Barr is anti-freedom and pro-false hysteria when it comes to cannabis,” Justin Strekal, political director of NORML, told Marijuana Moment. “Sadly, his desire to continue to see hundreds of thousands of Americans be arrested and incarcerated due to minor marijuana charges is held far too many of his colleagues in Congress.”
Karen O’Keefe, director of state policies at the Marijuana Policy Project, told Marijuana Moment that Barr’s “facts and priorities are wrong.”
“No legalization state allows public smoking of cannabis (other than in adult-only locations in some cases), and almost all medical cannabis states forbid it,” she said. “Marijuana isn’t associated with increased mortality, while cigarettes are associated with more than 480,000 deaths a year in the U.S. alone. Why is Rep. Barr maligning and voting against the safer substance, and working to keep it illegal?”
Here are some examples of public consumption policies in legal cannabis states.
Alaska: For adults over 21 years of age, the law permits “consumption of marijuana, except that nothing in this chapter shall permit the consumption of marijuana in public.”
California: “You can consume cannabis on private property but you cannot consume, smoke, eat, or vape cannabis in public places.”
Colorado: “Using marijuana in any way—smoking, eating or vaping—isn’t allowed in public places.”
Illinois: “There is no public consumption allowed for cannabis. Smoking or consuming weed is illegal in motor vehicles and public spaces, including your front porch.”
Massachusetts: “You can’t use marijuana in any form (smoking, vaping, edibles, etc.) in public or on federal land.”
Nevada: “Adults 21 years and older can legally consume marijuana, but with restrictions on where it can be consumed: You cannot use marijuana in any public place.”
Oregon: “Recreational marijuana cannot be sold or smoked in public.”
Put simply, the notion that public consumption of marijuana is widespread is a false narrative. A standout exception is Oklahoma, where medical cannabis patients are able to consume wherever tobacco is permitted. That said, Barr’s assertion that public marijuana smoking is legal in “many states” is patently false.
That the congressman is perpetuating that narrative isn’t especially surprising, however. Barr is no fan on cannabis, voting against spending bill amendments preventing the Justice Department from using its fund to interfere in state-legal medical marijuana programs as well as a separate measure last year that would’ve extended protections to all state cannabis programs.
That said, Barr isn’t alone in his opposition to the menthol cigarette ban that cleared the House on Friday. Several Democrats joined Republicans in voting against the measure in committee and on the floor. But their reasoning was generally that the targeted ban would lead to overpolicing of minority communities.
Photo courtesy of WeedPornDaily.
VA Notice About Researching Medical Marijuana For Military Veterans Deleted Shortly After Posting
The U.S. Department of Veterans Affairs (VA) will soon release a notice announcing that it is seeking information about the potential of marijuana and its components to treat medical conditions that commonly afflict military veterans.
A post describing the request was briefly uploaded to a government website this week, though it’s since been deleted—but not before Marijuana Moment downloaded a copy. A representative said in response to an e-mailed query that the document was “rescinded for edits” and a revised version will be published “at a future date.”
VA’s Clinical Science Research and Development Service wrote in the filing that it is interested in establishing a research program designed to “examine the potential for medical marijuana and cannabinoids to treat disorders and diseases prevalent in our Veteran population.”
In a request for white papers on the topic, the department said it’s especially interested in identifying potential medical uses for cannabis to treat neuropathic pain and symptoms of post-traumatic stress disorder (PTSD).
“Unrelieved neuropathic pain experienced by Veterans after spinal cord or peripheral nerve injury contributes to depression, anxiety, disrupted sleep, and overall decreased quality of life,” VA said. “PTSD, also highly prevalent in Veterans, is a mental health problem often co-morbid with chronic pain.”
“A large percentage of Veterans who seek relief from these conditions, resort to smoking marijuana or use unregulated dietary cannabis supplements, etc,” it continued. “It is therefore imperative to determine which cannabinoid compounds are truly effective, for which symptoms, in which populations, as well as the associated risks.”
VA said it is committed to researching and developing evidence-based treatment options for veterans, and that’s what the program is meant to address.
“Without the needed evidence base for medical marijuana, this will not be a treatment choice within VA,” the department wrote. “We hope to support a series of clinical trials, which in case of positive outcomes, will generate robust data to support the use of cannabinoid(s) for pain and/or PTSD (or one or more of its symptoms).”
The department plans to conduct clinical trials if the evidence indicates that medical cannabis can be useful. It touted the “cadre of experienced clinical investigators, a highly participatory research population, and mechanisms in place to support every aspect of clinical research.”
White papers submitted to VA under the now-deleted solicitation must contain four components: 1) the “formulation and route of administration of the cannabinoid preparation,” 2) their ability to manufacture and supply those preparations, 3) the investigational new drug registration for compounds that aren’t already approved by the Food and Drug Administration (FDA) and 4) evidence about the product’s efficacy in treating pain, PTSD and other conditions.
As drafted, the notice gives a deadline of March 15 to submit the requested one-page white papers, though it’s not clear if that will change when the updated notice is released.
Additionally, VA said it plans to collaborate with industry partners for “further understanding and development of evidence-based treatments such as medical marijuana and cannabinoids” and on April 27, will hold an “Industry Day” to discuss the “goals of the program.”
The department is “particularly interested in obtaining information about cannabinoid drugs availability, likelihood of their approval by the FDA (if not yet approved), and the data supporting their use for pain and PTSD treatment in Veterans,” the notice says.
Members of Congress and veterans advocates discussed the need for alternative treatment options, including medical cannabis, during a joint committee hearing earlier this week.
At the same time, bipartisan legislators are asking their colleagues to cosponsor a bill that would require VA to conduct research into the therapeutic potential of marijuana for veterans. That legislation already has 104 House cosponsors.
Read VA’s since-rescinded notice on medical marijuana research below:
Photo courtesy of Mike Latimer.
House Democrats Block Amendment To Restrict Marijuana Products In Anti-Vaping Bill
House Democrats pushed back against a Republican attempt to include a flavored marijuana vaping ban in a broader anti-vaping bill that passed the chamber on Friday, arguing that it doesn’t make sense to prohibit products that are already illegal under federal law.
Instead, several lawmakers argued that Congress should enact separate cannabis reform legislation that could include provisions designed to protect public health and reduce the appeal of marijuana to youth.
The issue first came up during a House Rules Committee hearing on Wednesday, with Rep. Morgan Griffith (R-VA) introducing an amendment to “include a prohibition against flavored marijuana products” such that they would be “treated in the same manner as flavored tobacco products” under the bill.
While the congressman argued that language of the legislation implicitly already provides for such a ban, he said it was important to clarify to send a message to young people that they can’t vape products containing nicotine or THC.
“Let it not be said in 2029 that we had a chance and we felt maybe we were getting to it in 2020,” he said. “Let’s just go ahead and do it. Let’s say you can’t sell flavored marijuana THC vaping products. My amendment makes that clear.”
Watch the conversation below:
Democratic members said they shared Griffith’s concern about underage use of flavored cannabis vaping products. However, Rep. Ed Perlmutter (D-CO) pushed back and said the proposal is not germane because marijuana remains illegal under federal law and so regulating these products requires separate congressional action.
Earlier in the hearing, he suggested that his House-passed cannabis banking bill—the Secure and Fair Enforcement (SAFE) Banking Act—could serve as a vehicle to address the body’s concerns.
“We have to start addressing it because we have 47 states that now are allowing some level of marijuana use when the statute under the Controlled Substance Act clearly makes it illegal,” the congressman said. “There’s a bill sitting in the Senate called the SAFE Banking Act that may get back here at some point, and we could put some testing and regulatory components on it.”
Watch this exchange below:
Is a flavored marijuana vaping ban even necessary?
Also during the hearing, Rep. Rob Woodall (R-GA) pressed Rep. Frank Pallone (D-NJ) about the lack of specificity in the bill as it concerns marijuana vaping products. Woodall said he wanted that aspect addressed before he leaves office in nine months.
“It strikes me…more than strange that banana crush [nicotine vaping products] will no longer be available to adults in my district. But banana strawberry cream, which is an illegal [marijuana] product today, will continue to be available at 180 retailers near you,” Woodall said. “I don’t know how I take that message into my high schools and say that we’re going to reduce drug dependency in the months and years ahead.”
Watch the conversation below:
Pallone said he appreciates Woodall’s concern that flavored vaping products can mislead consumers about what they’re actually putting into their bodies and that he “would tend to think that the same problem would exist” for flavored marijuana products. However, he said there’s a distinction to be made.
“Most people tell me that nicotine is much more toxic and much more dangerous to your health than marijuana so maybe we shouldn’t have restrictions on marijuana at all and maybe we shouldn’t have any restrictions on flavored marijuana because the marijuana doesn’t have the same health problems that nicotine has,” he said. “Maybe I should say, assuming that marijuana is dangerous then maybe the flavored should be. But it’s not as dangerous.”
“The reality is that we know that nicotine is much more dangerous than marijuana so maybe the flavors masking it is not as serious a problem as it would be for nicotine,” he said.
Griffith’s amendment was blocked from floor consideration in a party-line vote of 3-6 by the panel, but the conversation around flavored marijuana products continued on Friday on the House floor.
Rep. Greg Walden (R-OR) brought a poster board showing pictures of flavored cannabis vaping products and lamented that they are not explicitly included in the anti-vaping bill.
“If you want to do something about kids—if you want to do something about lung disease—then we need to do something about marijuana and the oils it gets mixed with that this bill does not address,” he said.
But Rep. Earl Blumenauer (D-OR) pointed out that if Republicans are interested in ensuring that such marijuana products are properly regulated, the substance needs to be removed from the Controlled Substances Act to provide Congress with the means to enact regulations.
Rep. Earl Blumenauer counters by pointing to marijuana's schedule I status, saying federal regulation of flavored cannabis would be like trying to regulate "flavored heroin." Plugs the MORE Act to deschedule marijuana. https://t.co/w4Jpudt137
— Emily Kopp (@emilyakopp) February 28, 2020
Imposing regulations on marijuana while it’s still federally prohibited is “like regulating flavored heroin,” he said. The congressman added that a bill to deschedule marijuana called the Marijuana Opportunity Reinvestment and Expungement (MORE) Act would give lawmakers the tools to protect public health.
“The challenge that we have now is to be able to move forward—to be able to protect young people and the public,” Blumenauer said. “Cannabis is a red herring. If we tax and regulate it, then we can deal with the products they’re talking about. But unless and until we bring it—as two-thirds of the states have done—to actually tax and regulate it, we can’t deal with that. It doesn’t matter.”
We have a crisis of youth vaping. And we’ve seen a disturbing number of lung injuries & deaths tied to the oil used in marijuana vaping. Unfortunately #HR2339 before us today does nothing to impact either. Instead, it's a partisan publicity stunt by big government liberal elites. pic.twitter.com/AUx8ZMar0L
— Richard Hudson (@RepRichHudson) February 28, 2020
Not all Democrats were on board with the anti-vaping bill.
It was a tight 213-195 vote in the House on Friday. Top Democratic leaders are faced challenges as they worked to get the broader legislation approved. Some members of the party have expressed opposition over policies to ban flavored tobacco, including menthol, which they argue would lead to overpolicing of minority communities.
Image by Lindsay Fox from Pixabay.