Oregon Rep. Reintroduces Small Biz Bill To Amend Tax Code For Cannabis Companies

Oregon Congressman Earl Blumenauer is taking another shot at passing the Small Business Tax Equity Act, a bill that aims to amend an IRS code to allow state-legal cannabis businesses to take federal tax deductions.

Blumenauer, a House member who founded the Congressional Cannabis Caucus, reintroduced the measure on Monday, after several unsuccessful attempts in previous sessions, Marijuana Moment reported.

The proposed bill, which has not yet been scheduled for a hearing or vote, could potentially offer some relief to cannabis businesses struggling with high tax burdens. The current 280E code denies deductions and credits to any business involved in the trafficking of controlled substances, including marijuana.

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Blumenauer says the current 280E code makes legal cannabis businesses pay two to three times more in taxes than similar non-cannabis businesses.

This unfair treatment, he argued, incentivizes businesses to cut corners.

Aaron Smith, the CEO of the National Cannabis Industry Association, agrees. The outdated provision prevents state-licensed cannabis businesses from reaching their full economic potential and replacing illegal markets, he said.

In 2020, the IRS updated its guidance, clarifying that marijuana businesses can reduce their gross receipts by calculating the cost of goods sold to determine gross income, but standard deductions are still not allowed.

Earlier this year, Congresswoman Nancy Mace introduced a bill to amend the Internal Revenue Code of 1986.

A Relief For Cannabis Businesses Facing High Taxes

In late September, a report revealed that 10 multi-state operators (MSO) owed $500 million to the IRS. Those cannabis companies included Acreage Holdings Inc. ACRDF, Ascend Wellness Inc. AAWH, Ayr Wellness Inc. AYRWF, Cresco Labs Inc. CRLBF, Columbia Care Inc. CCHWF, Curaleaf Holding Inc. CURLF, Green Thumb Industries Inc. GTBIF, TerrAscend Corp. TRSSF, Trulieve Cannabis Corp. TCNNF, and Verano Holdings VRNOF.

Observers argue that a potential solution to ease the tax burden on cannabis businesses would be for the federal government to deschedule or reschedule cannabis. That would allow these companies to take standard deductions.

However, descheduling has proven to be a complex process and may take several years to complete. Nonetheless, Adam Goers, senior vice president, Corporate Affairs at Columbia Care, stated at the recent Benzinga Cannabis Capital Conference that he expects a decision to be made in about 10 months.

Photo: Courtesy Of Markus Winkler On Unsplash