Cannabis Tax Deduction Ban Bill Gains 15th Sponsor in Congress

WASHINGTON – A federal proposal to preserve strict tax restrictions on Cannabis businesses has picked up additional support in Congress. The bill that would block state-legal Cannabis businesses from claiming standard federal tax deductions, regardless of whether Cannabis is reclassified under federal drug law, has gained its 15th sponsor across the House and Senate.

All sponsors are Republicans.

Sen. Ted Budd (R-NC) added his name to the Senate version, S. 471, marking the second new sponsor this week and bringing the total to 15. The addition follows Rep. Michael Lawler (R-NY) joining the House companion, H.R. 1447.

The legislation, titled the No Deductions for Marijuana Businesses Act, seeks to amend the Internal Revenue Code to ensure that Section 280E continues to apply to Cannabis-related activities. Under current law, Section 280E bars businesses involved with Schedule I or II controlled substances from deducting ordinary expenses like rent, payroll, utilities, and advertising, limiting deductions to cost of goods sold. This results in effective tax rates often exceeding 70% for many operators in states where Cannabis is legal.

The measure’s sponsors argue that rescheduling Cannabis to S III, a move that would generally lift the 280E restrictions, should not result in what they characterize as a “massive tax break” for an industry that continues to operate under substantial federal restrictions in many respects.

The push arrives as President Trump signed an executive order on December 18, 2025, directing the Attorney General to expedite the rescheduling process to S III, citing needs for expanded medical research and alignment with evidence on Cannabis’s medical use and lower abuse potential compared to S I substances.

Congressional Research Service reports have examined related tax issues, including debates over whether the current application of 280E raises constitutional concerns by treating Cannabis businesses differently from others.

Both bills remain in committee [H.R. 1447 with the House Ways and Means Committee and S. 471 with the Senate Finance Committee] with no scheduled hearings or floor action to date.

For the Cannabis industry, the sponsor additions highlight continued congressional resistance among some Republicans to full tax normalization, even as rescheduling could deliver substantial relief by allowing standard deductions and potentially lowering federal tax liabilities significantly. The outcome will depend on the Justice Department’s progress under the executive order and broader legislative dynamics in a divided Congress.

Yet, the real focus remains on whether [and when] rescheduling is finalized, as this would directly influence the financial pressures faced by Cannabis businesses nationwide.