The simple truth is that regulated cannabis markets are not working for the vast majority of small businesses, including equity businesses.

Regulators increasingly understand that these businesses are struggling, but face the daunting challenge of knowing where to start with the many, many, many voices calling for attention. Of course, regulators are also wary of accepting a rescue plan for Main Street businesses from lobbyists exclusively paid for by the handful of large Wall Street backed businesses that can afford such slick-talking representatives.

Providing a credible voice for those Main Street businesses is at the core of NCIA’s mission.

As a result, our Policy Co-Chairs Khurshid Khoja and Michael Cooper recently traveled to the annual external stakeholders meeting of the Cannabis Regulators Association (better known as CANNRA), where they were invited back to address state and local cannabis regulators from across the country. Michael and Khurshid spoke on issues of crucial importance to the future of the industry, including the challenges facing small businesses, the successes and failures of social equity programs, the potential pitfalls of rescheduling without addressing FDA oversight in advance, and establishing a level playing field between state-licensed cannabis businesses that provide highly regulated delta-9 THC marijuana products, and unregulated actors that provide equivalent products with equally potent, psychotropic and/or chemically analogous cannabinoids derived from hemp.

Regulators were clear at the meeting that they need more credible, tangible solutions for the challenges facing these markets, and they wanted to hear directly from the nation’s oldest, largest and still most representative non-profit trade association for the regulated cannabis industry.

Today, NCIA is proud to offer the first of a series of policy papers that offer specific steps that regulators and policymakers across the nation can take to help these struggling markets.

Want to help NCIA fix the challenges you’re facing? Existing members are encouraged to contact us at Membership@thecannabisindustry.org to provide feedback or learn how you can get involved with this project. Not a member? No problem. Sign up here, and roll up your sleeves to join the fight.

Section 280E of the Internal Revenue Code forbids businesses from deducting otherwise ordinary business associated with the “trafficking” of Schedule I or II substances, as defined by the Controlled Substances Act.

This provision was enacted by Congress in 1982 in order to penalize illegal drug dealers.  However, today the IRS aggressively applies Section 280E to state-licensed cannabis businesses, entities that were never conceived of when the statute was originally adopted.

An overwhelming majority of U.S. states now permit some form of legal cannabis commerce despite its nonsensical Schedule I status under federal law. As a result of the outdated federal status, 280E is being applied to thousands of licensed businesses effectively prohibiting them from taking the ordinary business deductions every other business relies on. 

We updated our position paper, “IRC 280E: An Unjust Burden on State-Legal Cannabis Businesses,” to help illustrate the facts about this outdated provision of the tax code. We’ve already delivered this publication to every member of Congress but we encourage you to download it and share with those in your network who need to know about 280E. 

The publication includes data from NCIA’s chief economist Beau Witney which shows that exempting state-legal cannabis businesses from 280E would create a net benefit to the economy of nearly $2 billion dollars over the next three years. That means more new jobs, more prosperity, and more payroll taxes for the federal government.