Businesses which dispense medical marijuana may soon have the same options as other small businesses in regards to business expense deductions. This is due to the recent introduction of bills which would protect access to medicinal marijuana through banking and tax laws.
As reported by AccountingToday.com: “The bills were authored by Rep. Pete Stark, D-Calif., Barney Frank, D-Mass., and Jared Polis, D-Colo.”
The Small Business Tax Equity Act, HR 1978 would make it possible for medical marijuana dispensaries to claim deductions on their federal tax returns for business expenses. Representing California’s 13th District, Rep. Stark introduced this act for congressional record on May 25, 2011. In a floor statement, Mr. Stark provided the following information:
“Our tax code currently undercuts legal medical marijuana dispensaries by preventing them from taking the full range of deductions allowed for other small businesses. While unfair to these small business owners, the tax code also punishes the thousands of patients who rely on them for safe, legal, reliable access to medical marijuana as recommended by a doctor.”
The proposed Small Business Tax Equity Act addresses this issue by creating an exception to IRS Code Section 280E. Without this exception, medical marijuana dispensaries are prohibited from claiming deductions or credits for any business expenses incurred throughout the tax year when filing federal income tax returns. This is despite the fact that the sale of marijuana for medical purposes is legal in the District of Columbia and sixteen other states. Although the current tax code is in place to prevent illegal drug trafficking from being a deductible expense, it also prevents dispensaries operating legally from claiming deductions as well. These businesses however are required to report income from the sale of medical marijuana and pay federal, state and local taxes on this income.
The Small Business Tax Equity Act is only one of a trio of bills proposed. The Small Business Banking Improvement Act, HR 1984 is sponsored by Jared Polis. Congressman Polis represents the 2nd District, Colorado. The proposed bill would ensure dispensaries acting as legal small businesses have access to basic banking services. Financial institutions are required to report activities of state licensed medical marijuana businesses to the federal government under the Bank Secrecy Act. The Small Business Banking Improvement Act would amend this act and allow state-certified businesses full access to banking services.
The third bill proposed is the Medical Marijuana Patient Protection Act, HR 2835 by Representative Barney Frank. This Act would afford patients prescribed medical marijuana certain rights in states where it is lawful to dispense marijuana for medical purposes. Federal prosecution of individuals and entities acting in compliance with state laws would be immune from federal prosecution. The bill would also move marijuana from Schedules I or II under the Controlled Substances Act. Basically, in states where medical marijuana is legal to dispense and use (when prescribed by physician) state laws would no longer be superseded by federal laws in regards to the prosecution