WASHINGTON, D.C. – Despite saying this week that he would offer an amendment to help Cannabis Tax Breaks, Republican U.S. Sen. Cory Gardner of Colorado failed to get a vote on the issue during consideration of a broad GOP-led tax reform bill.
As a result, the measure, which would have exempted cannabis growers and retailers who operate legally under state law from a federal penalty on illegal drug sellers, is not currently attached to a broad tax reform bill that Republicans are working to send to President Trump’s desk by the end of the year.
Following a lengthy session during which other members offered various amendments, the Senate approved the legislation on a largely party-line vote early Saturday morning with a margin of 51 to 49.
Gardner was unsure he had enough support in the chamber to approve the amendment in light of the $5 billion price tag that Congress’s Joint Committee on Taxation reportedly scored it with.
Because the tax bill was being considered under a budget reconciliation process that allowed Republicans to avoid a filibuster and advance the proposal with 51 votes instead of 60, the overall plan needed to avoid increasing the deficit by more than $1.5 trillion over the next decade.
Since Gardner’s measure, while focused on allowing marijuana operators to be taxed fairly like other businesses, would in effect amount to a cut from their current rates, it would reduce revenue and add to the deficit.
Nonetheless, the conservative anti-tax group Americans for Tax Reform included the measure in a list of “key votes,” calling it “good tax policy.”
Under current federal law, a 1980s provision effectively forces cannabis businesses to pay a much higher tax rate than other companies.
The statute was originally intended to stop drug cartel leaders from writing off yachts and expensive cars, but today its language means that that state-licensed growers, processors and sellers of marijuana — which is still a Schedule I substance under federal law — can’t take business expense deductions that are available to operators in other sectors.
As a result, cannabis businesses often pay an effective tax rate upwards of 65-75 percent, compared with a normal rate of around 15-30 percent.
The marijuana reform provision was also not included in the version of the tax legislation recently passed by the House, where that chamber’s Rules Committee blocked floor consideration of an amendment on the issue two weeks ago.
Now, a bicameral conference committee will hammer out the overall differences between the two chambers’ bills into a single proposal that can be sent to the president. It is technically possible that the cannabis amendment could still be inserted in conference, though it would be unusual for congressional leaders to attach a provision that wasn’t approved by either chamber and which concerns a still fairly controversial issue like marijuana.
A standalone House bill to shield state-legal marijuana businesses from 280E has 40 cosponsors. The companion Senate legislation has six cosponsors.