As the cannabis rescheduling project hangs in the balance, two Republican senators are attempting to ensure that one of its core benefits would be made redundant, even if rescheduling is successful.
Aside from the potential of interstate trade and the official acknowledgement of cannabis’ medical uses, businesses across the US are primarily looking ahead to the tax benefits that will come with rescheduling.
Section 280E of the federal tax code currently prohibits businesses involved in trafficking Schedule I or II controlled substances from deducting ordinary business expenses, leading to significantly higher effective tax rates for cannabis businesses compared to other industries.
Figures from Whitney Economics suggest that the additional tax paid by US cannabis operators due to 280E is now over $2bn a year, including hundreds of millions of dollars for some of the largest companies.
However, a newly proposed bill from senators James Lankford and Pete Ricketts would indefinitely extend this tax burden, even if cannabis is moved to Schedule III.
Under the proposed legislation, any company involved in ‘trafficking marijuana’ would remain subject to 280E, unless cannabis is completely descheduled—a scenario that remains politically improbable in the near future.
Lankford, a long-time cannabis opponent, framed his bill as a safeguard against legitimizing the industry.
“Marijuana doesn’t make our families stronger, our streets safer, or our workplaces more productive,” he stated, adding, “Businesses that sell federally illegal drugs—including marijuana businesses—shouldn’t get federal tax breaks.”
The effort has been strongly backed by Smart Approaches to Marijuana (SAM), a prohibitionist advocacy group which has already proven a major hindrance to the rescheduling process.
SAM President Kevin Sabet hailed the bill as a way to prevent what he called $2.3 billion in ‘tax cuts’ for the cannabis industry, stating that ‘the federal government should not be in the business of giving tax relief to the federally illegal, addiction-for-profit marijuana industry.’
The bill has sparked sharp criticism from cannabis industry advocates, who argue that maintaining 280E restrictions will only benefit the illicit market by making legal cannabis less competitive.
