New tax provisions in MORE Act — some improvement

The MORE Act, legalizing marijuana, has been amended before a House vote this week, with a little improvement in the tax provisions.  Here is the new text: https://docs.house.gov/billsthisweek/20201130/CP-116HR3884RH-COMPARED-RCP116-67.pdf

Here are some quick reactions:

1.  The tax rate inches up over time, instead of being frozen at a permanently low rate.  This increase follows the old Blumenauer–Wyden bill, https://www.finance.senate.gov/imo/media/doc/(7)%20Marijuana%20Revenue%20and%20Regulation%20Act%20(GAI17183).pdf, but with lower rates, capped at 8 percent ad valorem, instead of 25 percent in Blumenauer–Wyden.  The tax then switches from ad valorem to weight after year five, but still works with a look-back to price.  If you keep looking back, why bother?  That’s a switch that makes no sense to me. But increasing rates have been suggested since at least RAND-Vermont, https://www.rand.org/pubs/research_reports/RR864.html.

2.  The tax kicks in right away, as near as I can tell, instead of being delayed.

Old MORE Act section 4(c) :

Effective Date.—(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to articles manufactured or imported in calendar quarters beginning more than one year after the date of the enactment of this Act.

New:

(f) Effective date.— 

(1) In general.— Except as otherwise provided in this subsection, the amendments made by this section shall apply to removals, and applications for permits under section 5922 of the Internal Revenue Code of 1986 (as added by subsection (b)), after 180 days after the date of the enactment of this Act. 

The bill doesn’t necessarily contemplate sales before 180 days after the date of the enactment of this Act.  I’m not sure, but it’s an improvement over the one-year-plus tax holiday in the original MORE Act.

+++

Most of the criticism of the original bill here (https://newrevenue.org/2020/10/22/problems-with-the-more-act/) still obtains. For instance, the Act still favors advertising and disfavors Mom & Pops by repeal of 280E, and it still requires transfer pricing adjustments, but there has been a little improvement.  So good.

+++

On a non-tax issue, I think this is new:

Packages.— All cannabis products shall, before removal, be put up in such packages as the Secretary shall by regulation prescribe. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s