Anyone who thought that the momentum towards federal liberalization of marijuana would be a straight line found themselves with a cold dash of water to the face. Late last week Republican senators filed a bill, entitled the “No Deductions for Marijuana Businesses Act,” which would preserve a punitive federal tax policy that bars cannabis companies from taking ordinary business deductions, regardless of whether marijuana’s status as a Schedule I substance is ever changed.

Courtesy of Kyle Jaeger at Marijuana Moment:

Two GOP senators have introduced a bill that would continue to block marijuana businesses from taking federal tax deductions under Internal Revenue Service (IRS) code 280E — even if it’s ultimately rescheduled.

Sens. James Lankford (R-OK) and Pete Ricketts (R-NE) filed the “No Deductions for Marijuana Businesses Act” on Thursday to maintain the tax barrier for the industry, which has been eagerly following the ongoing administrative process of moving cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) in large part because it would address their 280E challenges under current law.

While rescheduling isn’t a guarantee, and Drug Enforcement Administration (DEA) hearings on the proposal have been delayed, the senators are aiming to preemptively take the wind out of the industry’s sails.

The bill would amend the IRS code to say that, in addition to all Schedule I and Schedule II drugs, businesses that work with marijuana specifically would be barred from taking tax deductions that are available to other industries.

If enacted into law, this could be a fatal blow to a number of cannabis businesses that have ordered their business models around no longer having to pay 280E taxes following the presumptive rescheduling of marijuana.

Let’s be clear, I don’t think this legislation will become law. But friends should be honest with each other. There will not be some panacea that absolves marijuana operators of their tax burdens without a tremendous fight. And operators should, in my opinion, pay their taxes when due. The failure to do so could cause them tremendous pain down the road.