Congressional Republicans (with the Obama administration’s bipartisan support) are all for using the IRS to target and decimate one sector of the U.S. economy — medical marijuana providers. Alternet reports:
The IRS employs Section 280E, a 1982 tax code addition that was a response to a drug dealer’s successful effort to claim his yacht, weapons, and even bribes as business expenses. Under 280E, individuals involved in the illicit sale of controlled substances — including marijuana, even medical marijuana in states where it is legal — cannot claim standard business expenses on their taxes.
“The Obama administration is using Section 280E to push these local and state licensed medical marijuana dispensaries out of business,” said Kris Hermes, spokesman for the medical marijuana defense group Americans for Safe Access.
Most small businesses pay an effective tax rate of between 13% and 27% on net income, according to the Small Business Administration. With the unintended application of 280E, state-legal marijuana providers pay an average effective tax rate of 65-80%.
The provision can be used to great effect. Oakland’s Harborside Health Center was hit with a $2 million IRS assessment in 2011 after the tax agency employed Section 280E against. Harborside is fighting that assessment, even as it continues to try to fend off federal prosecutors’ attempts to shut it down by seizing the properties it leases.
280E reform is going to be an uphill battle. In the last Congress, Rep. Pete Stark (D-CA) introduced House Bill 1985, the Small Business Tax Equity Act, designed to end the 280E problem for medical marijuana businesses, but it went to the Republican-controlled House Ways and Means Committee, where it was never heard from again.