GOP Insider Says Marijuana Tax Fix Possible in 2017

By Tom Angell | March 14, 2017

If anyone knows what Republicans in Congress are going to do about tax policy, it's Grover Norquist.

As president of Americans for Tax Reform, Norquist has led efforts to block tax hikes, and at least 208 members of the U.S. House and 45 senators have signed his organization's pledge to oppose any such increases.

Now he says there's a chance that the GOP-led Congress might enact what would amount to a huge tax cut for marijuana businesses this year.

Under an obscure federal tax provision known as 280E, cannabis providers are not allowed to take business expense deductions that are available to companies in any other industry.

Congress is expected to move large-scale tax reform legislation this year that would lower corporate rates and aim to simplify the tax code. Norquist told Marijuana Business Daily in a new interview that there's a good shot to include a 280E fix in the bill "if some of the libertarian Republicans made that a condition of voting for the whole package."

The prohibition on taking deductions and using other credits available to non-cannabis businesses can lead to marijuana providers paying effective tax rates between 65-75 percent, compared with a usual rate of about 15-30 percent.

In the new interview, Norquist says he's discussed the problem with Congressional leadership and thinks that they might get on board with the fix if they hear from enough rank-and-file members about it.

"I’ve brought it up with leadership," he said. "They understand the argument. I just need to get more congressmen weighing in and saying, 'Hey, leadership, this is an issue that a number of us have.'"

Standalone legislation to reform the provision has been introduced over the past several years but has never received a hearing or a vote. Similar bills are expected to be introduced in the 115th Congress in the coming weeks, and could be used as a way to demonstrate support for gutting 280E as part of the broader tax bill.

"So, as we get that number up and as we get more structures from around the country weighing in, I think it becomes more doable," Norquist said, referring to the growing number of states enacting and implementing marijuana reforms. "It’s going to be fixed in the next few years. I’d rather have it fixed in the next year."

Norquist, who once famously said that he wants to shrink the federal government "down to the size where we can drown it in the bathtub," also discussed looming uncertainty over whether the Department of Justice would continue the Obama administration's policy of generally respecting state marijuana laws, and the industry's lack of access to banking services.

In 2009, Norquist joined a sign-on letter urging Congress to pass legislation letting states legalize marijuana without interference. Such a policy "would free federal law enforcement resources for the more urgent tasks of thwarting, apprehending, and prosecuting international terrorists or murderers," the letter said. "As a matter of States' rights, regulating marijuana and alcohol seem indistinguishable; and, alcohol policy has been entrusted to the States since the repeal of Prohibition in 1933.”

Tom Angell

Tom Angell is a senior political correspondent for MassRoots. A 15-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he serves as chairman of the nonprofit Marijuana Majority and is editor of the daily Marijuana Moment newsletter.

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