Two US Senators, James Lankford and Pete Ricketts, have introduced a bill aimed at preventing licensed cannabis businesses from deducting ordinary business expenses from their taxes, even if cannabis is rescheduled from a Schedule I drug to a Schedule III substance. The bill, known as the “No Deductions for Marijuana Businesses Act,” would make it permanent for cannabis businesses to be unable to deduct expenses, regardless of the drug’s scheduling.
Currently, cannabis businesses are unable to deduct expenses under Section 280E of the Internal Revenue Code because cannabis is a Schedule I drug. However, if cannabis is rescheduled to a Schedule III substance, businesses would be able to deduct expenses, which could lead to significant tax savings.
Lankford and Ricketts are working with the prohibitionist group Smart Approaches to Marijuana (SAM) to introduce the bill, which has been met with criticism from the cannabis industry. SAM President and CEO Kevin Sabet claims that the federal government should not be giving tax relief to the “federally illegal, addiction-for-profit marijuana industry.”
However, the majority of US cannabis businesses are not profitable, with only 27.3% of businesses reporting a profit in 2024. In comparison, 65.3% of all small businesses in the US are profitable.
This is not the first time Lankford has taken a hostile stance towards the cannabis industry. In July 2024, he and Rep. Pete Sessions led a coalition of 25 GOP lawmakers in condemning the Department of Justice’s rescheduling proposal.
The fate of the bill is uncertain, as there is no guarantee that the federal government will reschedule cannabis. The Drug Enforcement Administration’s chief administrative law judge granted an interlocutory appeal in January, which could delay the rescheduling process.
