Introduction of the Small Business Tax Equity Act

Floor Speech

Date: April 17, 2023
Location: Washington, DC


Mr. BLUMENAUER. Mr. Speaker, today I introduced the Small Business Tax Equity Act. This legislation would create an exception to Internal Revenue Code Section 280E that allows businesses operating in compliance with state laws to take business-related deductions associated with the sale of marijuana just like any other legal business.

U.S. cannabis laws are broken and woefully outdated. Section 280E of the federal tax code prohibits anyone engaged in the purchase or sale of Schedule I or Schedule II substances from deducting their business expenses from their taxes. To date, 38 states have legalized medical or adult use marijuana in some form. However, marijuana is currently a Schedule I substance under federal law and therefore businesses operating in compliance with state law are not allowed to deduct the ordinary expenses of running a small business, like rent, utilities, and payroll. They cannot claim the Work Opportunity Tax Credit if they hire a veteran; they cannot depreciate their American-made irrigation equipment; and they cannot take any credit or deduction relating to construction or operation costs if they want to revitalize a building for their operations.

Prohibiting marijuana businesses from deducting their business expenses means that marijuana businesses often pay federal income tax rates that are orders of magnitude higher than non-marijuana businesses. Disallowing business expense deductions creates a disproportionate burden that can put small dispensaries out of business and prevents many small businesspeople from entering the industry in the first place.

The Small Business Tax Equity Act will finally allow state regulated marijuana businesses to deduct their business expenses on their federal taxes, restoring equity with other legal businesses and helping make the legal cannabis competitive.

I look forward to working with the original cosponsors, Representatives Joyce, Lee, and Mace and my colleagues in the House and Senate to enact this legislation and end the harmful prohibition on tax deductions for state-legal cannabis businesses.