280E Tax Ignored in Federal Marijuana Bill

So several Members of the House introduced a bill, reproduced below, to keep the Federal Government out of states that have legalized marijuana.  They neglected to fix a huge tax problem for any state-legal marijuana business, Code section 280E, described by a source in the medical marijuana business this way:  “#1. The federal tax situation is the biggest threat to MMJ businesses and could push the entire industry underground.”  http://mmjbusinessdaily.com/marijuana-business-conference-wrapup-36-tips-lessons-take-aways-for-the-cannabis-industry/

Maybe the sponsors didn’t want the bill referred to the Committee Ways and Means.  Not that it’s on a fast track to enactment.

I’m all for a high Federal tax on marijuana, but section 280E, denying all deductions other than cost of goods sold, is crude to the point of counterproductivity.

Here’s the bill:

from http://www.gpo.gov/fdsys/pkg/BILLS-112hr6606ih/pdf/BILLS-112hr6606ih.pdf

112TH CONGRESS

2D SESSION H. R. 6606

To amend the Controlled Substances Act to provide that Federal law shall

not preempt State law.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 27, 2012

Ms. DEGETTE (for herself, Mr. COFFMAN of Colorado, Mr. PAUL, Mr. FRANK

of Massachusetts, Mr. BLUMENAUER, Mr. FARR, Ms. LEE of California,

Mr. POLIS, Mr. COHEN, and Mr. GRIJALVA) introduced the following bill;

which was referred to the Committee on the Judiciary, and in addition

to the Committee on Energy and Commerce, for a period to be subsequently

determined by the Speaker, in each case for consideration of such

provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Controlled Substances Act to provide that

Federal law shall not preempt State law.

1 Be it enacted by the Senate and House of Representa2

tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Respect States’ and

5 Citizens’ Rights Act of 2012’’.

6 SEC. 2. IN GENERAL.

7 Section 708 of the Controlled Substances Act (21

8 U.S.C. 903) is amended—

1 (1) by striking ‘‘No provision’’ and inserting

2 ‘‘(a) IN GENERAL.—Except as provided in sub3

section (b), no provision’’; and

4 (2) by adding at the end the following:

5 ‘‘(b) SPECIAL RULE REGARDING STATE MARIHUANA

6 LAWS.—In the case of any State law that pertains to mar7

ihuana, no provision of this title shall be construed as indi8

cating an intent on the part of the Congress to occupy

9 the field in which that provision operates, including crimi10

nal penalties, to the exclusion of State law on the same

11 subject matter, nor shall any provision of this title be con12

strued as preempting any such State law.’’.

Current section 903 reads:

No provision of this subchapter shall be construed as indicating an intent on the part of the Congress to occupy the field in which that provision operates, including criminal penalties, to the exclusion of any State law on the same subject matter which would otherwise be within the authority of the State, unless there is a positive conflict between that provision of this subchapter and that State law so that the two cannot consistently stand together.

+++++

Here’s a plug for deeper work:

“Gangs, Ganjapreneurs, or Government: Marijuana Revenue up for Grabs,” State Tax Notes, Volume 66, Number 4, pages 255-269 (October 22, 2012), online at http://ssrn.com/abstract=2165864 and https://newtax.files.wordpress.com/2012/10/gangs-ganjapreneurs-or-government-marijuana-revenue-up-for-grabs.pdf

“Laws To Tax Marijuana,” 59 State Tax Notes 251-280 (January 24, 2011), downloadable at http://ssrn.com/abstract=1741735 and https://newtax.files.wordpress.com/2011/01/20-may-2011-taxing-marijuana4.pdf.

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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