Legal marijuana businesses are treated like two-bit thugs when it comes time to pay the taxman. Even though over half the states in America have legalized weed for medicinal or recreational purposes, the federal government still considers it an illegal activity and will not allow these companies to claim business deductions the same as other legitimate areas of commerce.
Internal Revenue Code 280E serves to rape the proprietors of any business engaged in the selling of Schedule I and Schedule II substances by prohibiting the deduction of crucial expenses that would allow them to hang on to more of their profits. Unfortunately, this slimy tax law is forcing some legal pot shops to cough up a rate of up to 70 percent of their earnings to DC hooligans.
However, federal lawmakers are tired of watching Uncle Sam squeeze blood from the cannabis industry in the name of the war on drugs, and believe the time has come for marijuana to be removed from the fine print of this tax code. To achieve this, Representative Earl Blumenauer, an Oregon Democrat, is sponsoring the Small Business Tax Equity Act—a bill which would provide state-licensed cannabis businesses with protection against the wrath of 280E.
There is no doubt the business of legal marijuana is on its way into the mainstream. Earlier this month, Alaska, Oregon and the District of Columbia passed initiatives to legalize recreational pot, and now the consensus is that the 2016 election will bring even more states out of the prohibitionary fog. Yet despite the widespread success of the cannabis industry in both the medicinal and recreational sector, the federal government has remained unwavering on its over seven-decade-long stance against legal weed.
Now that the attitudes of the great American populace are shifting in favor of a pot-friendly nation, lawmakers believe the time is right to work toward putting an end to the legal discrepancies between federal and state law—including banking issues. Representative Ed Perlmutter, a co-sponsor of the bill, says that these changes will be possible as more states continue on the path of legalization; there will be a “tipping point” that will force Congress to stand face to face with a snarling dog and either throw it a bone or risk being eaten alive.
There is a possibility the bill could be included in the Senate Finance Committee’s “tax extender package,” which could bring relief to the cannabis industry as early as the beginning of next year. However, there hasn’t been much support from the committee to reform tax laws in regards to marijuana, so pot commerce being removed from the strife of 280E is not likely—at least not yet.
Unfortunately, this could mean the end for many marijuana-related companies. Experts predict that if a significant amount of change is not made to the law, many pot businesses will be rubbed out by high taxes and forced out of the market before having an opportunity to get started.