Rep. Earl Blumenauer remains optimistic that Congress will move on reform legislation that would help legal cannabis businesses access banking and financial services as well as tax deductions typically offered to businesses.
“I want this to be the last session to work on these issues,” he said in a media briefing Wednesday. “It’s time for the federal government to finally catch up.”
Earlier this week, the Portland Democrat introduced the Small Business Tax Equity Act that would create an exception to a section in the tax code known as 280E that prevents legal cannabis businesses from taking business tax deductions.
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As it stands now, businesses selling legal marijuana cannot take business-related tax deductions such as rent, utilities and payroll because marijuana is a Schedule I substance under federal law. These businesses also can’t claim credit for hiring veterans, can’t depreciate American-made irrigation equipment and can’t take credits or deductions for construction or operations costs for building renovations.
“280E, when people focus on it and understand it, is hopelessly unfair to charge state-legal cannabis businesses two to three times the normal level of taxation,” Blumenauer said. “280E is a disincentive for people to fully and fairly report taxes. It’s no secret the IRS is understaffed. As long as people are unable to fully deduct taxes there will be effort to try to minimize what is declared.”
The inability to deduct business expenses contributes to the high costs faced by cannabis businesses. For Oregon businesses it exacerbates tough economics created by the current oversupply of product and falling prices.
Blumenauer’s optimism around legislative reforms is buoyed by the fact that 155 million Americans are living in states with some form of cannabis legalization. Polling, he said, shows 68% of the American population supports ending federal prohibition on Marijuana.
“I am engaging in a full-court press in terms of what we do to deal with this,” he said.
As for access to banking and financial services, he sees a way forward in the Democrat-controlled Senate. The House has repeatedly passed the Secure And Fair Enforcement (SAFE) Banking Act that would open banking and financial services to legal cannabis businesses. It most recently passed the House in 2021. However, it has not moved in the Senate.
Negotiations have continued on how to move the SAFE Banking Act. Blumenauer noted the enthusiasm of supporters has not waned and the work to bring people onboard is coming together.
“I could not be more excited about what we have done in the last four years (for cannabis reform) and the prospects in the Senate going forward, which has been our stumbling block in the past,” he said.
Where he is less optimistic is whether the Biden administration will make moves that could open up interstate commerce for cannabis between states where it is legal.
“I have seen progress with the Biden Administration,” he said citing the president’s Oct. 6 directive pardoning people with simple federal cannabis possession convictions and an evaluation of cannabis as a banned drug. “(Interstate trade) is not something they are likely to jump on immediately.”
