Senator Lankford Introduces Bill to Prevent Tax Deductions for Cannabis Businesses

LOS ANGELES- Senator James Lankford (R-OK) introduced the “No Deductions for Marijuana Businesses Act,” aiming to prevent cannabis businesses from deducting business expenses on their federal taxes, even if cannabis is rescheduled under federal law. The bill seeks to amend the Internal Revenue Code to ensure that businesses involved in the trafficking of marijuana remain ineligible for federal tax deductions or credits, regardless of any potential changes in the drug’s scheduling status.

Currently, under Section 280E of the Internal Revenue Code, businesses trafficking Schedule I or II controlled substances, including cannabis, cannot deduct ordinary business expenses. If cannabis were to be rescheduled to Schedule III or lower, this prohibition would no longer apply, allowing such businesses to claim deductions. Senator Lankford’s proposed legislation aims to preempt this possibility by maintaining the deduction ban specifically for marijuana-related businesses, irrespective of rescheduling.

Senator Lankford stated, “Marijuana doesn’t make our families stronger, our streets safer, or our workplaces more productive. Businesses who sell federally illegal drugs—including marijuana businesses—shouldn’t get federal tax breaks. This bill clarifies federal tax law to make sure a federally illegal product does not have a federally legal tax deduction.”

The bill has garnered support from organizations such as Smart Approaches to Marijuana (SAM). SAM President and CEO Dr. Kevin Sabet commented, “The federal government should not be in the business of giving tax relief to the federally illegal, addiction-for-profit marijuana industry. This legislation would prevent deficit increases while ensuring that taxpayers don’t foot the bill for the revenue gap made by tax write-offs for people who choose to violate federal law and poison our kids.”