Last week, Medical Marijuana Business Daily wrote about how a federal lawmaker is planning to introduce legislation that would prevent the Internal Revenue Service from making life exceedingly difficult for medical marijuana dispensaries.
Under the proposal – called the Small Business Tax Equity Act of 2013 – the IRS could no longer invoke the so-called 280e provision in the US tax code to bar state-legal cannabis companies from deducting common business expenses such as payroll and rent. Congressman Earl Blumenauer (D-Oregon) reportedly plans to introduce the bill this week.
It’s an important move for several reasons: The bill elevates the discussion among those who have the power to change the situation, gets the issue in front of the public and lets cannabis professionals know that someone is in their corner.
But that might be about all the measure does, as its chances of passage are slim-to-none barring a miracle.
Hank Levy, a well-known accountant serving the MMJ industry, summed it up best: “This just isn’t a very important issue” for lawmakers, he said, adding that “I just don’t think it’s on the radar of anybody.”
Indeed, with all that’s going on federally – and with the inability of Congress to pass anything these days – it would be surprising if the bill even gets a hearing.
The only way it might gain traction, some say, is if it’s lumped in with a larger IRS or tax overhaul – something that has a lot of support in the Republican-controlled House.
Still, the medical marijuana community should temper its expectations, as this could be a major problem for the industry well into the future. That means dispensaries will continue to take a bigger tax hit than virtually every other type of business in the United States, making it harder to cover costs, earn a profit and – ultimately – stay in business. This can be one of the most difficult aspects of running an MMJ operation, particularly for owners who weren’t aware of the tax issue before entering the industry. Entrepreneurs thinking about starting a medical or recreational marijuana operation should be particularly aware of this challenge, as it could make or break their business.
Also last week, Medical Marijuana Business Daily wrote about the grand plans of Jamen Shively, a former Microsoft executive who wants to create a national chain of cannabis stores. The goal is laudable, and it’s good to see some prominent professionals from other industries trying to help the cannabis business mature and grow.
But the strategy seems grossly out-of-touch with the realities of the industry and strikes some as exactly what you’d expect from an outsider who has not done their due diligence on the unique challenges and limitations of the cannabis business. Perhaps Shively will prove all his skeptics wrong, but at this point it’s easy to poke holes in his plan (from legal, financial, operational and other perspectives). Shively has also revealed little in the way of specifics or addressed how he will navigate around these significant hurdles, so it’s unclear exactly what his plan entails.
A truly national cannabis brand – at least one involved in actually selling marijuana, rather than ancillary products and services – likely won’t develop until we see some real change in federal laws that make such a business possible.
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