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Wyden, Blumenauer Propose Changing Federal Tax Code So Pot Businesses Can Deduct Expenses

<p>In 2011 a<a href="http://www.rand.org/content/dam/rand/pubs/research_reports/RR400/RR466/RAND_RR466.pdf" target="_blank"> national survey</a> on drug use and health found more marijuana users in Oregon reported getting the drug for free than paying for it.</p>

In 2011 anational survey on drug use and health found more marijuana users in Oregon reported getting the drug for free than paying for it.

Oregon Senator Ron Wyden has thrown his weight behind an effort to change the federal tax code to make it easier for pot businesses to claim deductions. Wyden is the ranking democrat on the Senate Finance Committee.

Senator Wyden and Representative Earl Blumenauer announced Thursday they will introduce bills in the Senate and the House of Representatives next week that would amend Section 280E of the IRS code, a provision of tax law passed by congress in 1982.

Here’s the problem 280E creates for pot shops and dispensaries in the 23 states that have legalized medical or recreational pot. The IRS expects them to pay taxes on their business income, but because pot is federally illegal, Section 280E bars them from deducting normal expenses like rent and storefront payroll payroll.

As a result, if they follow the law, dispensaries can owe more than 50 percent of their income in federal taxes.

Representative Blumenauer says the hefty tax burden effectively creates a disincentive for pot businesses to operate legally and pay taxes.

“It makes actually no difference how you feel about the use of marijuana, it’s having equitable treatment for legitimate businesses,” he says.

Blumenauer and Wyden have proposed making normal business deductions available to marijuana businesses that comply with state laws. The two democrats have at least one conservative ally; anti-tax icon Grover Norquist has endorsed their bills.

Copyright 2015 Oregon Public Broadcasting

Amelia Templeton is a multimedia reporter and producer for Oregon Public Broadcasting, covering Portland city hall, justice and local news. She was previously a reporter for EarthFix, an award-winning public media project covering the environment in the Northwest.