Congressman Earl Blumenauer, founder and co-chair of the Congressional Cannabis Caucus, introduced the Small Business Tax Equity Act, which creates an exception to Internal Revenue Code Section 280E to allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.
“State-legal cannabis businesses are denied equal treatment under 280E. They cannot fully deduct the cost of doing business, which means they pay two or three times as much as a similar non-cannabis business,” said Blumenauer. “This grotesquely unfair treatment incentivizes people to cut corners. If Congress wants to get serious about supporting small businesses and ending the illicit cannabis market, it is commonsense that we allow legal cannabis operations to deduct business expenses, just like any other industry.”
“MCBA is proud to support this legislation that would help level the playing field for minority cannabis entrepreneurs who simply cannot become profitable under 280E,” said Kaliko Castille, President of the Minority Cannabis Business Association. “It is hard enough to survive as a minority entrepreneur, but it is long past time for us to treat state-legal cannabis businesses like any other small business in our country and tax us fairly.”
“The two greatest challenges cannabis entrepreneurs are currently faced with are the lack of access to capital and unfair tax burdens. By eliminating the impact of 280E on state-legal cannabis operations, Congress would be giving these businesses, including small and minority operators, the opportunity to remain financially viable and to reinvest in their companies, communities, and workforce through tax credits and deductions that are routinely offered to other domestic industries. This relief is crucial for an industry that employs hundreds of thousands of American workers and generates billions of dollars in annual state and federal taxes – albeit without access to traditional financial resources,” said Saphira Galoob, Executive Director of the National Cannabis Roundtable. “NCR thanks Congressman Blumenauer for his leadership on this critical, bipartisan issue and for his commitment to ensuring the cannabis industry grows in a fair and equitable manner.”
“The unfair application of the outdated 280E provision on state-licensed cannabis businesses is preventing our industry from reaching its full economic potential and our ability to successfully replace criminal markets in accordance with the will of the voters and state legislators that have implemented modern state marijuana programs across the country,” said National Cannabis Industry Association CEO Aaron Smith. “We commend Congressman Blumenauer and the bill’s original co-sponsors for leading this narrowly-crafted, sensible legislation that would resolve this unforeseen consequence and bring our tax code into the 21st century.”
“NORML commends the sponsors of this legislation for their efforts to end the unjust federal overtaxation of licensed, regulated cannabis businesses throughout the country,” said Morgan Fox, Political Director for NORML. “Allowing the deductions that most other legitimate businesses enjoy will facilitate new opportunities in the legal cannabis industry and make it more competitive with the unregulated market, which will directly benefit consumer health and public safety.”
Absent this legislation, Section 280E of the federal tax code prevents cannabis businesses from deducting ordinary expenses associated with running a small business, including rent, utilities, and payroll. They cannot claim the Work Opportunity Tax Credit if they hire a veteran; they cannot depreciate their American-made irrigation equipment; and they cannot take any credit or deduction relating to construction or operation costs if they want to revitalize a building for their operations.
Since 1973, Congressman Blumenauer has been leading the charge in cannabis reform. In 2017, he founded the bipartisan Congressional Cannabis Caucus to create a forum where Members can engage, discuss, and learn about the need to establish a more rational approach to federal cannabis policy.