Legislation in the U.S. House of Representatives that would prohibit marijuana businesses from claiming tax deductions, even if marijuana is rescheduled under federal law, has gained an eighth sponsor, with Representative Andy Harris (R-MD) signing on this week as a cosponsor.
Filed last month by Representative Jodey Arrington (R-TX), House Resolution 1447 would amend the Internal Revenue Code to ensure that businesses involved in marijuana sales remain ineligible for standard tax deductions, even if marijuana is reclassified under federal law. The bill initially had six cosponsors.
Under current law, state-licensed marijuana businesses are unable to deduct common expenses, such as rent and payroll, due to Section 280E of the tax code. This provision applies to any business engaged in the trafficking of Schedule I or II substances. If the Drug Enforcement Administration (DEA) follows through on its proposal to move marijuana to Schedule III, businesses would ordinarily gain access to these deductions. However, Arrington’s bill would explicitly maintain the ban, ensuring marijuana companies continue to face a significantly higher tax burden than other industries.
The timing of this legislative push comes as marijuana rescheduling remains stalled. A judge recently canceled a set of hearings on the DEA’s proposed rule to move marijuana to Schedule III, which were originally scheduled to begin on January 21. This delay has left the federal status of marijuana uncertain, with opponents of reform seeking to maintain strict financial and legal barriers for the industry.
A companion measure to HR 1447, Senate Bill 471, was also filed last month with two sponsors.
