Refresh Checked Unchecked Menu Search Shopping bag Geolocation Person Facebook Instagram Twitter YouTube Info Icon CBC Icon CBC Shape CBD Icon CBD Shape CBG Icon CBG Shape THC Icon THC Shape THCV Icon THCV Shape Loading…

Guess Which Industry Didn’t Get a Break in the Tax Bill

December 4, 2017
Sen. Cory Gardner (R-CO), center, joined by, from left, Sens. John Barrasso (R-WY), John Thune (R-SD), and Senate Majority Leader Mitch McConnell (R-KY), praises Supreme Court Justice nominee Neil Gorsuch, a fellow Coloradan during a news conference on Capitol Hill in Washington, Tuesday, March 21, 2017. (J. Scott Applewhite/AP)
The sweeping tax bill passed by the US Senate over the weekend contains all sorts of giveaways to businesses, from generous write-offs for factories and equipment to bargain-basement rates on offshore tax havens. But for all the boons to business it provides, the bill fails to deliver commonsense tax reform to the cannabis industry.

Two separate proposed amendments to the Senate tax bill would have ended a decades-old penalty that currently treats state-legal cannabis businesses like drug cartels. The rule, IRS Section 280E, prevents cannabis businesses from taking tax deductions available to other industries, often pushing their effective tax rates to more than 70%.


5 Tips for Lowering Your 280E Tax Burden

Ending the penalty has high-profile supporters on both sides of the aisle, including Sens. Rand Paul (R-KY) and Ron Wyden (D-OR). But as the Senate tax vote approached, Sen. Cory Gardner (R-CO), who sponsored the two amendments, withdrew his proposals after noting the plan’s price tag. “Cory Gardner says it scores at $5B and will be a lot more if all 50 states legalize,” reported Bloomberg’s Steven Dennis.

If cannabis “scored” at $5 billion—which means the nonpartisan Congressional Budget Office estimates that it would remove $5 billion from the federal budget over the next decade—it would be among the few parts of the tax bill that were scored at all before the Senate’s vote. Gardner’s quote also raises the question: If all 50 states legalize, why would the federal government continue to treat licensed cannabis businesses like illegal drug cartels?

“It’s time for the federal government to allow Colorado businesses to compete.”
US Sen. Cory Gardner

The final Republican tax bill—which is forecast to cost $1.4 trillion over the next decade—proceeded without so much as a vote on the cannabis amendments.

A day after abandoning his proposed cannabis provisions, Gardner, who voted for the tax bill, praised its passage. “For too long, too many Coloradans have felt left behind.” he said in a statement. “They have been forced to cope with a tax system that favors elites and gives advantages to those who know how to game the system.”

“We know workers bear much of the burden of the corporate tax rate,” he continued, “and lowering the corporate tax rate will lead to bigger paychecks for hardworking Coloradans.”


2017 Cannabis Jobs Count: Legal Marijuana Supports 149,304 Americans

That’s a controversial claim among economists, but if Gardner believes it, it means he gave up on securing similar benefits for his constituents who work in cannabis. Colorado’s legal cannabis industry supports nearly 27,000 full-time jobs, according to a September analysis by Leafly.

Texas Republican Sen. John Cornyn did better for his corporate constituents. He introduced an amendment that secured a new, lower tax rate on certain income from oil and gas operators. Industry representatives, according to the New York Times, said that without the amendment, they would been excluded from benefits that other industries were getting. Sound familiar?

Gardner himself has acknowledged that 280E “puts thousands of legal marijuana businesses throughout Colorado at a disadvantage by treating them differently than other businesses across the state.” He’s called its removal “commonsense” and touted its bipartisan appeal. But in the wee hours Saturday morning, as senators scrambled to push through a controversial tax overhaul, Gardner didn’t even demand a vote.


Would a ‘Public Cannabis Bank’ Really Work in California?

There’s still hope. While Gardner pulled back the amendments from the tax bill debate, a standalone Senate bill, S. 777, dubbed the Small Business Tax Equity Act, would achieve the same goal by exempting state-legal cannabis businesses from 280E. It’s been sitting in the Senate Finance Committee since March.

Gardner added himself as a co-sponsor last month. “Coloradans made their voices heard in 2012 when they legalized marijuana,” he said at the time, “and it’s time for the federal government to allow Colorado businesses to compete.”

Ben Adlin's Bio Image

Ben Adlin

Ben Adlin is a Seattle-based writer and editor who specializes in cannabis politics and law. He was a news editor for Leafly from 2015-2019. Follow him on Twitter: @badlin

View Ben Adlin's articles

  • c-luv

    While it’s not right to treat legal business this way, we also have to take into account that the federal government is currently only taking baby steps toward decriminalizing cannabis. This would have been a huge leap, and would completely legitimize the cannabis industry at the federal enforcement level. In their eyes, taking this money would be akin to breaking their own laws, and would end the war on cannabis as we know it. So, as an advocate, I’d praise it if it happened. But to my other beloved advocates out there, don’t be disappointed. It’s great that these amendments existed in the first place! That’s a step in the right direction. Let’s focus on getting hemp and cannabis off the drug schedule first. Then we can deal with financing and taxes. Because as long as it’s a schedule 1 ‘drug’, the other policies and agencies will not be able to acknowledge it.

    • Azwe Thinkweiz

      I agree with most of what you said but these are not legal businesses in the eyes of the federal government, they have no reason at all to advance illegal businesses unless it was planned to come of the schedule 1 list. If you want to be angry, be angry at your state level government for not lowering taxes. They are why it is legal. Looking at the latest tax hungry California on this one….NY to follow most likely.

    • E.L. Bl/Du

      first of all they need to REMOVE the sched 1 classification and realize that it IS medicine. its the ONLY thing keeping big Pharma out. they dont want to acknowledge that this can END mexican drug cartel (they are already ripping out canna farms to be replaced by poppy fields) They just want the $$$ it delivers, but do nothing to reduce how many are making them money in the prison population by arresting them. that is the reality of it, and if it were legal all over the states, the black market would crumble in an instant. Small farms will be driven out of business due to all the fees. In Oregon it already is costing me $400 just for the permits to grow 6 plants. We have to pay the fee to move it from our home b.c they put moratoriums on ANY residential grows, even tho the law says you can. Local govt wants you to BUY it from THIER dispenaries. The way its going they want to run out the personal grows and just get chemically grown cannabis that they mostly convert to oil. Think about all the chemicals going into your body, the ground water and contaminating our fish populations. the laws need to catch up with the times.

  • Jim Jackson

    While I’m not a Colorado resident I hope the residents of that brave state ask Senator Gardner why it would be so bad to remove 5 billion dollars from the budget over 10 years? That means less government. That means more money in the pockets of consumers that support the economy. Sound like good conservative governing. Seems weird that a republican senator would be against that. Oh, that’s right, republicans lie…

    • Azwe Thinkweiz

      Why would you ask Gardner? Federal dollars cant go for something that is federally illegal. 500 million a years would not mean less government. 1.75 million dollars each day was spent before I could type the first letter after hitting reply. I am glad to see you have come around to knowing that lower corporate taxes means more money in the pockets of consumers. See republicans don’t lie, trickle down works and the last 8 failed years shows that trickle up doesn’t. But you wont place the blame squarely on the dems who had a super majority and could have put anything they wanted in to law but did nothing! You sound like a good dem minion though. Enjoy your triggered life.

  • Azwe Thinkweiz

    “Texas Republican Sen. John Cornyn did better for his corporate
    constituents. He introduced an amendment that secured a new, lower tax
    rate on certain income from oil and gas operators.”

    It is not a new lower tax rate for oil and gas operators. It is allowing them to have the same rate as other business types and only on certain types of income. Such information goes unchecked by leafly to extend their agenda which I support, but should be done in an intellectually honest way. When your source is the NYtimes… Yeah. Not credible. MY friend Jim Jackson already established that this would save consumers money. Thanks Jim.

  • Kristofor Gullickson

    I am wondering if the Bipartisan “21st Century Care Act” (2016), opens the door to legislation that removes many of the restrictions placed on MMJ and MJ. Especially the schedule and classification of it within the legal system. I think maybe once sent up through the Courts, the many avenues and angles from which to take from other such points of view, should allow for breathing room for everyone within the industry. For example, did anyone know that MJ seed is Naturally a source of food for Wildlife? By removing it from nature we are essentially depriving animals of a viable food source. The Department of Natural Resources has written within its text the many rules and regulations regarding such issues AND they are a Federally Funded officers of the Law. How is that? Anyone? DNR has more power than anyone knows regarding the Law. I am not sure about the tax code, but I am certain once researched, there is another avenue from which to take regarding the lines between Man, Animal, and Agriculture…….Food for thought……Please tell me if anyone succeeds, I do not have the money, or the health for such an endeavor at this moment. But I do read alot and know how to do the research. There la definitely something here, from my intectual point of view. Why rely on Congress, why wait for them to get rich by allowing your Franchise or restricting your Franchise? We are the constituents, have Courage for your Convictions and start trail blazing my friends…….If I had any securities and support given the opportunity and half a chance, I most definitely could stake my claim. Please reply, I want to know what people think. Thank you.