Connect with us

Politics

Senators Could Vote On These Marijuana Tax Amendments This Week

Published

on

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 β€”Β known as 280EΒ β€” 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 β€” which is still a Schedule I substance under federal law β€” 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.

If you value staying updated on cannabis news, please start a monthly Patreon pledge to support Marijuana Moment!

Tom Angell is the editor of Marijuana Moment. A 15-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he serves as chairman of 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.)

Advertisement

Stay Up To The Moment

Marijuana News
In Your Inbox

Support Marijuana Moment