State-legal marijuana businesses would enjoy long-requested federal tax relief under a bill introduced Monday in the U.S. House of Representatives by a key congressional cannabis advocate.
The Small Business Tax Equity Act, introduced by Rep. Earl Blumenauer, an Oregon Democrat who co-chairs the Congressional Cannabis Caucus, would make marijuana businesses obeying state law exempt from Section 280e of the Internal Revenue Code.
That section of the tax code, long a bane of legal marijuana businesses, prohibits sellers of Schedule 1 controlled substances from making certain typical business deductions on their federal tax returns.
With cannabis businesses unable to claim those expenses, their effective tax rates can reach 90%, industry advocates say.
In turn, this situation incentivizes the tax-free illicit market that jeopardizes the marijuana legalization experiment itself, a reality Blumenauer acknowledged.
“This grotesquely unfair treatment incentivizes people to cut corners,” he said in a statement Monday.
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