Oregon Congressman Introduces Legislation for Small Business Tax Equity

Oregon Congressman Introduces Legislation for Small Business Tax Equity



An Oregon congressman called for the update of the federal tax laws, in response to a robbery of an all-cash business. U.S. Rep. Earl Blumenauer spoke out about the need to protect the marijuana businesses in Oregon. Democrats Sen. Ron Wyden and Rep. Blumenauer, announced they plan to introduce the bill bicamerally. It was initially introduced by the congressman, during the previous legislative session and was entitled, The Small Business Tax Equity Act.

The bill would create an addendum to Internal Revenue Code Section 280E. Should the bill become law, it would allow cannabis businesses to take advantage of the tax benefits given any other legal business. While the senator and congressman are from Oregon, the new federal law would help all states that have legalized the sale of marijuana.

BusinessAdditionally, the new law would enable all cannabis entrepreneurs to sell their merchandise using banking tools. The ability to create and use checking accounts and accept credit/debit cards is limited to businesses the federal government defines as legal. The technicality is that those who sell marijuana are breaking a federal law. However, the businesses must have a federal tax license but banking regulations will not allow those in the cannabis industry to use their services. As a result, any company selling marijuana and related items must conduct business using an all-cash system.

“Willamette Week” reported there was a bank in Oregon that opened its doors to the marijuana industry. MBank began serving business needs in 2014 but was forced to close the accounts within a year. This was due to the pressure from government regulators, which arose from dealing with the marijuana monies that came through the bank.

Rep. Blumenauer complained:

It just drives me crazy. We have over 5,000 legal marijuana businesses around the country. A number of them here in Oregon, and because of the stupid policy, they are required to be conducted on an all-cash basis.

Doing business this way can be a dangerous proposition. The robbery of the Mt. Hood Wellness Center in Southeast Portland, on Aug. 3, 2016, demonstrates this is a valid concern.

The theft at gunpoint in Portland is not an isolated case. In February 2014, NBC News announced there had been 317 burglaries and seven robberies in Colorado’s pot shops during the previous six months. The website, Merry Jane reported on June 27, 2016, that because banking institutions refuse to do business with the marijuana industry, the on-site cash is tempting to criminals. According to the website, throughout June there were multiple robberies in many cities in Colorado, California, and Michigan.

BusinessRep. Blumenauer stated the number of people who live in jurisdictions with legalized sales of marijuana encompasses two-thirds of the population. He cites the fact that 23 states, the District of Columbia, and Guam now have legal sales and use of medical cannabis. The congressman says it is time for the federal government to recognize this fact.

Since marijuana is a Schedule I narcotic and the federal tax code states it is illegal to sell such substances, businesses who sell cannabis are not allowed to deduct regular business expenses. They are, however, required to pay Federal Income Taxes. The manager of Rouge Valley Cannabis Dispensary, outside of Medford, Oregon, complained that the state and federal governments are more than happy to take their money, even though due to regulations he cannot open a business banking account.

A spokesperson for the Oregon Department of Revenue told reporters that the funds collected for taxes from the cannabis companies would be treated like any other money the tax department receives, it will go into the bank. Julia Dodson said, “The money that comes into state hands is not considered drug money.”

Interestingly, the Internal Revenue Service (IRS) is willing to take a bank-issued cashier’s check to cover income taxes that the business owners owe the federal tax agency.

BusinessAccording to Rep. Blumenauer, those taxes could be paid at a 90 percent rate, whereas a so-called legit business generally only pay 20. This is one of the main reasons the congressman and Sen. Wyden plan to introduce legislation that would create a federal equity act for small business owners. 

Grover Norquist, the President of Americans for Tax Reform, explained that the tax laws, as they stand now were not intended to punish law-abiding entrepreneurs. They were designed to uncover criminals. He further stated it was time for Congress to clarify this and create a provision that eliminates the law’s unintended consequences.

The Executive Director of the National Cannabis Industry Association seconds the idea that those who legally sell marijuana are not criminals. Aaron Smith stated: “The small businesses that make up the legal cannabis industry are working overtime to be responsible, contributing members of their communities.” He believes it is an outrage that they pay federal taxes at exorbitant rates. The monies would be better used to create more jobs, add benefits for their employees, and increase salaries.

BusinessSmith offered his support for “Rep. Blumenauer and Sen. Wyden standing for up fairness and support for small business. [That is] something everyone should applaud. We certainly do.” According to the congressman’s announcement the bicameral legislation will be introduced during the week of Aug. 8-12. He will continue to call for revisions to the federal tax code until the government accepts that marijuana is legal in almost half of the United States and adopts The Small Business Tax Equity Act.

By Cathy Milne


Earl Blumenauer Website: Representative Blumenauer and Senator Wyden Announce Commonsense Tax Reform for Legal Marijuana Businesses
Mail Tribune: Banks won’t take pot money, but state of Oregon will
Willamette Week: Robbery of Portland Cannabis Dispensary Points Out a Glaring Vulnerability: Cash
NBC News: High Crimes: Robber Gangs Terrorize Colorado Pot Shops
MERRY JANE: Are Weed Dispensary Robberies On The Rise?

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