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Wyden, Blumenauer push to reform tax laws for pot businessess

JOSEPH GALLIVAN - U.S. Rep. Earl Blumenauer (D-Ore.) and Sen. Ron Wyden (D-Ore.) this week will introduce bicameral legislation to reconcile state marijuana laws and federal tax. Seen here at a Thursday April 9 press conference with Measure 91 sponsor Anthony Johnson and Portland attorney Amy Margolis. This week, Rep. Earl Blumenauer (D-Ore.) and Sen. Ron Wyden (D-Ore.) will introduce bicameral legislation to reconcile state marijuana laws and federal tax law — particularly Section 280E.

The sensible-sounding Small Business Tax Equity Act would allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.

Currently, legitimate sellers of medical marijuana cannot declare such common items as rent, utilities and professional services (accounting) as expenses on their federal tax forms. They end up in a 70- to 90-percent tax bracket, instead of the more usual 20 percent for small businesses that the U.S. Small Business Administration estimates.

“Section 280E creates an unequal and unrealistic tax burden on these businesses,” Blumenauer said at a press conference last Friday in Portland.

Blumenauer said more than two-thirds of Americans live in places where pot is legal — if only for medical purposes — and that the federal government has to catch up and level the playing field.

His goal, with Wyden and other politicians, would “bring much-needed fairness and level the playing field for small businesses that follow state laws and creates jobs.”

He stressed that pot is now serious business.

“This money that they are now paying extra in tax is not available to grow the business. We’re talking that in five years the legal marijuana industry will be larger than the NFL (National Football League).”

The federal tax code prohibits anyone selling Schedule I or Schedule II substances from deducting business expenses associated with the sale of marijuana from their taxes. Marijuana is a Schedule I substance.

Blumenauer said Congress added this prohibition in 1982 after a drug dealer claimed his yacht and weapon purchases as legitimate business expenses.

“This is a question of standing up for the people of Oregon, and ensuring that the federal government respects the decision Oregonians have made at the ballot box,” Wyden said.

The politicians were accompanied by two of the more articulate members of Oregon’s cannabis industry: attorney Amy Margolis, who for 10 years has represented many growers and is expanding her business; and Anthony Johnson, chief petitioner for Measure 91 which passed last November.

Margolis said she had seen “the enormous and unnecessary burden 280E places on small businesses and family farms. 280E stifles the entrepreneurship, job creation, excitement and enthusiasm that should accompany any burgeoning industry.”

She said the cannabis industry could help grow the economy and provide living wage jobs.

Margolis works with growers, packers and dispensaries.

“I have seen clients coming in aghast. They said if 208E did not exist I’d pay $60,000 in taxes. Because of 280E I have to pay almost $500,000 worth of taxes.”

Blumenauer said Oregon’s Measure 91 is the best in the nation, and he heaped praise on Anthony Johnson.

In brief remarks, Johnson thanked the politicians right back.

“We want to bring people out of the unregulated system ... and follow in the footsteps of the microbrewery and wine industries.”

Johnson said people want to pay taxes, pay living wage salaries and do the right thing.

Blumenauer said they would work with Oregon Sen. Jeff Merkley on the Senate Banking Committee, adding it was “insane that federal legislations encourage this to be an all-cash business.” He said he had seen “pictures of people in Colorado paying their taxes with shopping bags of $20 bills. If you care about money laundering, tax evasion, just theft, that’s goofy.”

Blumenauer believes the legislation has a good chance of passing, since it is a question of tax simplification and 230 million Americans now live in cannabis-friendly states.

Marijuana firms also cannot claim the Work Opportunity Tax Credit if they hire a veteran. They are also limited in lawful deductions relating to construction or operation costs if they want to remodel a building for their retail operations.

Grover Norquist, president of Americans for Tax Reform, has said: “The intent of the law was to go after criminals, not law-abiding job creators.”

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