For cannabis businesses in the U.S., the hope of finally being able to deduct normal business expenses—something most companies take for granted—could be slipping away. A new bill introduced by seven House Republicans aims to ensure that even if cannabis is rescheduled to a less-restricted category, those operating in the industry will remain burdened by heavy taxes.
GOP Lawmakers Push to Maintain 280E Restrictions
Representative Jodey Arrington (R-Texas) and six of his Republican colleagues introduced H.R. 1447 on Feb. 21, a bill that seeks to uphold the prohibition on tax deductions and credits for cannabis businesses. Under Section 280E of the Internal Revenue Code, businesses involved in Schedule I or II substances—like cannabis—are currently blocked from deducting everyday expenses, including payroll, rent, and utilities.
That rule has been a major obstacle for state-licensed cannabis businesses, many of which already struggle under high tax burdens. If cannabis is reclassified as a Schedule III substance, which the Department of Justice (DOJ) has proposed, these businesses would gain relief from 280E restrictions and be taxed more like traditional companies.
But Arrington and his co-sponsors don’t want that to happen. The bill’s co-sponsors include:
- Chuck Edwards (R-N.C.)
- Gregory Murphy (R-N.C.)
- Vern Buchanan (R-Fla.)
- Blake Moore (R-Utah)
- Gary Palmer (R-Ala.)
- Pete Sessions (R-Texas)
The House bill closely mirrors a Senate version introduced earlier this month by Senators James Lankford (R-Okla.) and Pete Ricketts (R-Neb.), titled the “No Deductions for Marijuana Business Act.”
Keeping Cannabis Businesses Under Heavy Tax Burdens
For large cannabis companies, the financial stakes are enormous. Some of the biggest businesses in the sector pay around $100 million a year in federal taxes, despite not being recognized as legitimate enterprises by the government.
Kevin Sabet, president of the prohibitionist group Smart Approaches to Marijuana (SAM), has openly supported efforts to keep those tax burdens in place. He praised the proposed legislation, pointing out that cannabis companies currently contribute $2.3 billion annually in federal taxes under Section 280E—revenue the government would otherwise lose if the rules changed.
Lankford, one of the Senate bill’s sponsors, made it clear where he stands.
“Marijuana doesn’t make our families stronger, our streets safer, or our workplaces more productive,” Lankford said in a Feb. 7 press release.
This opposition stands in stark contrast to the increasing acceptance of cannabis at the state level, where the industry has become a significant source of jobs and tax revenue.
The Rescheduling Fight and Its Uncertain Future
The DOJ’s proposal to reclassify cannabis as a Schedule III drug remains tied up in administrative review, but if successful, it could mark one of the biggest policy shifts for the industry. Schedule III substances are still controlled but subject to different tax treatment—which is why rescheduling could free cannabis businesses from the grip of 280E.
However, Arrington and his allies are determined to prevent that outcome. They introduced H.R. 1447 when the House wasn’t even in session, a move first reported by The Washington Post. While the exact text of the House bill was not immediately available as of Feb. 24, the goal is clear: ensure that cannabis businesses remain financially burdened, regardless of rescheduling.
Will This Bill Gain Traction?
With a divided Congress, the future of H.R. 1447 is uncertain. While some Republican lawmakers remain staunchly opposed to any federal cannabis tax relief, others—especially those from states with large cannabis industries—may not be eager to back a measure that could hurt businesses in their own districts.
On the other side, pro-cannabis lawmakers and industry advocates will likely fight hard to keep the rescheduling process moving forward without new tax restrictions. The DOJ’s decision, whenever it comes, could set the stage for a new battle over the financial future of legal cannabis in America.
Emily Wilson is a talented wordsmith whose passion for cannabis shines through in her eloquent articles that explore the plant’s cultural significance and historical context. With a focus on arts and lifestyle, she weaves together narratives that celebrate the creativity, innovation, and community fostered by cannabis enthusiasts worldwide. Emily’s unique perspective and engaging storytelling invite readers to embark on a journey of discovery and appreciation for the diverse facets of the cannabis experience.
