Bill Would Allow Marijuana Businesses to Join Mainstream Tax Laws

Marijuana advocates in the U.S. House of Representatives believe that the punitive federal tax code that treats state-legalized cannabis stores as a criminal enterprise can be reformed, perhaps within the next couple of months.

Internal Revenue Code 280E disallows any businesses that sell Schedule I or II illegal drugs, including marijuana, from deducting routine expenses associated with sales, including advertising, employee salaries and building leases. The result is that many marijuana businesses, legal in Colorado and in a growing number of others states, pay an effective tax rate of  70 percent or more of  their profits to the federal government.

U.S. Rep. Earl Blumenauer, D-Oregon

U.S. Rep. Earl Blumenauer, D-Oregon

Rep. Earl Blumenauer, D-Ore., is the sponsor of the Small Business Tax Equity Act, which would exempt state-licensed marijuana businesses from the 280E code. Congress approved 280E in 1982 as a tactic in the government’s war on drugs. Although Blumenauer thinks the bill could be approved within two months, so far it hasn’t mustered a committee vote.

But the nationwide movement toward some form of marijuana legalization has not been reflected by Congress. Selling marijuana remains a federal crime.

“Clearly the voters in various states are deciding on this issue and there is a need to resolve the disparity between state and federal law,” said Rep. Ed Perlmutter, D-Colo., in an email to Rocky Mountain PBS I-News. Perlmutter is a co-sponsor of Blumenauer’s bill and has also proposed his own legislation that would allow marijuana businesses full legal access to banking services.

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