Missouri lawmakers approve bill to relieve medical cannabis firms of hefty taxes

https://info.enjoywurk.com/cannabis-resource-center/280e-tax-deductions-compliance-strategy-explained

Bethan Rose Jenkins, Cannabis News Writer/Editorial

Lawmakers in Missouri have approved a measure that would reduce the cost of participating in the state’s medical cannabis industry. The bill, which was passed with “near unanimous approval,” aims to lift the tax burden for those who work for a legal weed business.

The bill regarding Section 280E of the federal tax code was successfully voted on during a recent Legislative session. However, it remains uncertain as to whether or not Gov. Mike Parson will sign the bill into law or reject it. Should Gov. Parson adopt the bill, medical cannabis business owners will legally be able to deduct “ordinary and necessary” business expenses.

The recently-imposed federal tax provision prohibits cannabis companies from claiming the same tax deductions  as those offered to companies in most other industries. Currently, tax credits and deductions are not available for the trade of business of trafficking Schedule I or II controlled substances.

Such a change will effectively position medical cannabis companies “on a level playing field with all other small businesses across the state when it comes to taxes.” This is according to the executive director of the Missouri Medical Cannabis Trade Association,  Andrew Mullins, during an interview with St. Louis Public Radio.

About Section 280E of the federal tax code 

Section 280E of the federal tax code creates a major impact on the cannabis industry. The restrictive law was enacted by the U.S. Congress back in the 1980s after a court case that refused a convicted cocaine trafficker’s request to claim deductions from typical business expenses under federal tax law.

Featured below is an expert from the written law:

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I or II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

In simple terms, the law prohibits cannabis businesses from filing any U.S. federal income tax deductions for ordinary and necessary business expenses; even if the cannabis company is licensed and registered as a legal business in their state of operation. 

Cannabis businesses hoping to reverse the law have endured numerous legal complications this year, such as setbacks at a U.S. appeals court and the U.S. Supreme Court in April and May, respectively.

Qualifying criteria for Missouri’s medical cannabis program

Missouri boasts a fairly expansive list of qualifying conditions. Patients who are diagnosed with one of the listed qualifying conditions can enroll in the program. Examples include:

  • Cancer 
  • Chronic medical conditions that inflict pain or muscle spasms
  • Debilitating psychiatric disorders
  • Epilepsy 
  • Glaucoma 
  • Intractable migraines
  • Prescription-treated medical conditions
  • Human immunodeficiency virus (HIV)

A number of terminal illnesses are also featured on the list of qualifying criteria, including amyotrophic lateral sclerosis (ALS), autism, Crohn’s disease, cachexia, hepatitis C, inflammatory bowel disease, neuropathic disease and sickle cell anemia.

You can find out more about Missouri’s medical cannabis program by clicking here.