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Congress Will Attempt to Amend IRS 280E Code Again in Aid of Marijuana Tax Relief

GOP Congresswoman Rep. Nancy Mace recently filed a bill that would provide federal tax relief for marijuana businesses by amending the Internal Revenue Service’s 280E Code. This means that state-legal marijuana industry operators would finally be able to partake of tax deductions applicable to any other business. This is under the guise of a congressional bill seeking to amend the infamous code 280E to bring about marijuana tax relief.

While the text is currently unavailable, it is said to be identical to previously filed versions of the Small Business Tax Equity Act. The bill, which comes as just days remain of the 117th Congress, will eventually provide relief to businesses who are unable to deduct business expenses from their federal tax or receive tax credits.

Buckling Under The Pressure

It is no surprise that the marijuana industry remains one of the most overtaxed and over-regulated industries in America in particular. The IRS’s 280E Code not only prevents marijuana businesses from claiming expenses in federal tax and tax credits but also adds insult to injury as these businesses are still expected to pay tax like any other company—something of a double whammy.

Initially, this was first sanctioned in 1982 to stop drug traffickers from writing off their expenses under federal tax provisions, but it has since been generally applied to state-licensed cannabis growers, processors and dispensaries. Naturally, this has led to an overall increase in their effective tax rates compared to businesses in other industries. This is despite efforts by lawmakers to level the playing field and treat marijuana businesses as those in more traditional industries.

However, the start of the 118th Congress means that Rep. Mace’s bill will not be advanced and will need to be reintroduced on the back of the new year, with the initial version sponsored by Rep. Earl Blumenauer (D-OR) of the Congressional Cannabis Caucus.

With the marijuana industry buckling under prohibition-esque treatment, many bipartisan lawmakers have long been fighting for the easing up of regulations and greater law reform for the industry. And the end is nowhere in sight.

Encouragingly, states like New Jersey and Pennsylvania have taken the initiative to provide relief in the form of banking and tax relief for the marijuana businesses that call them home.

IRS Apathy

According to Marijuana Moment, the Congressional Research Service (CRS) found in a 2021 report that the IRS has shown great apathy in the feat for cannabis law and tax reform, offering little tax guidance about how Section 280E should be applied. 

However, they did state in 2020 that while marijuana companies can’t partake of standard deductions, 280E did not “prohibit businesses in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income.”

Notably, it was around this time that the Treasury Department’s inspector general for tax administration criticized the IRS for negligence in adequately advising taxpayers in the marijuana industry about federal tax law compliance. They went on to direct the IRS to develop and publicize industry-specific guidelines for 280E applications.

Other Developments In Marijuana Tax Relief

The rear end of the 117th Congress saw various lawmakers raise their voices in solidarity with a belabored marijuana industry. For instance, Rep. Matt Gaetz reintroduced a bill which will promote marijuana research—a bill Gaetz has filed throughout the past several sessions. 

Significant inroads have also been made to protect consumer access to kratom, preventing adverse administrative actions against the natural substance. Kratom has long been used as an opioid alternative to mitigate withdrawal symptoms.

Despite ongoing developments in the fight against stringent laws against the marijuana industry, the situation appears hopeful, considering the number of lawmakers now actively engaged in marijuana advocacy. One thing is for certain—they won’t go quietly. As long as lawmakers and the public alike continue to advocate for the decriminalization of cannabis, the cause will continue to gain traction. 

Other Developments In Marijuana Tax Relief

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