US House Reps File Bill to Legalize Cannabis, Deliver 280E Relief, Permit Interstate Commerce

Despite 11 U.S. House Republicans backing legislation that intends to permanently punish cannabis businesses in the federal tax code, a trio of bipartisan representatives introduced a bill on April 17 that would do just the opposite and then some.  

U.S. Reps. Dave Joyce, R-Ohio, Max Miller, R-Ohio, and Dina Titus, D-Nev., filed the Tenth Amendment Through Entrusting States (STATES) 2.0 Act, legislation that aims to federally legalize cannabis through an approach that allows states, Washington, D.C., U.S. territories and tribal nations to determine how to regulate cannabis within their borders.

Primary provisions under the legislation include:

• Removing cannabis from the Controlled Substances Act while also supporting states that choose to maintain prohibition enforcement policies;
• Providing state-sanctioned cannabis businesses with federal tax relief by allowing them to deduct ordinary business expenses (removing their conduct as “drug trafficking” from Section 280E of the Internal Revenue Code); and
• Allowing for interstate cannabis commerce, including transportation through states and territories that choose to maintain prohibition policies.

Joyce, who co-chairs the Congressional Cannabis Caucus (CCC), sponsored a previous version of the STATES Act last Congress.

“Whether a state is pro-legalization or anti-legalization, we can all agree that the current federal approach to cannabis policy is not working,” Joyce said in a press release. “As President Trump has acknowledged, the existing policy has caused unnecessary harm and squandered taxpayer dollars by diverting law enforcement resources from combatting violent crimes to making needless arrests and facilitating incarcerations for small possessions of state-legal marijuana.”

Although President Donald Trump indicated along the campaign trail in September that he supported states’ rights on cannabis policy, as well as federal rescheduling and banking reform for the industry, he’s been silent on the issue since taking office 91 days ago.

Joyce said the STATES 2.0 Act would remedy a cannabis criminalization issue that the majority of Americans disagree with by bridging the gap between federal and state policies through the Tenth Amendment approach of the bill.

Although the Alcohol and Tobacco Tax and Trade Bureau (TTB) and the U.S. Food and Drug Administration would regulate cannabis products at the federal level, similar to how other drugs, food and dietary supplements, or cosmetics are regulated, the legislation states that the FDA will not have the authority to require premarket approval. Rather, regulation from the federal agencies would help ensure products meet standards for contaminant testing, manufacturing expectations and marketing practices. 

That said, the legislation would allow states to adopt overarching policies that work best for their residents.

“The STATES 2.0 Act ensures the federal government does not interfere with states or tribes that have chosen to legalize cannabis,” said Titus, who co-chairs the CCC with Joyce. “It’s time for national policy to catch up with the states or at least get out of the way.”

The legislation comes at a time when 24 states have legalized adult-use cannabis, and another 15 states have solely legalized medical cannabis. These states are tasked with adopting independent marketplaces, from seed to sale, in the absence of federal reform.

While the STATES 2.0 Act would deschedule cannabis from the Controlled Substances Act, it would continue to criminalize the distribution of cannabis to anyone under the age of 21 (other than for medical purposes) and prohibit cannabis businesses from employing persons under the age of 18.

“It’s time for federal lawmakers to establish commonsense guardrails that protect children, promote public safety, support scientific research, address addiction and mental health concerns, and uphold the rights of communities that choose to opt out of cannabis use,” Miller said. “This legislation empowers each state to adopt policies that reflect the needs and values of their residents without fear of federal interference.”

In addition, the legislation would require the U.S. comptroller general to conduct a study on cannabis legalization’s effect on traffic safety, one of the primary concerns among prohibitionists.

Specifically for multistate cannabis businesses, the opportunity to consolidate their cultivation footprints under interstate commerce represents a significant victory to grow cannabis in favorable regions, much like potatoes have become synonymous with Idaho, oranges with Florida and cheese with Wisconsin.

“In the absence of federal movement, the illicit interstate trade in cannabis has persisted even in the face of significant state policy changes,” the act states. “The federal government should be responsible for regulating and tracking this interstate trade to ensure cannabis does not end up where it does not belong.”

According to a recent economic report in California, unlicensed cannabis cultivators in the state export an estimated 9 million pounds, worth upward of $30 billion at retail, annually.

Meanwhile, for cannabis operators of all types, the ability to be treated like traditional American businesses rather than be subject to 280E’s punitive tax structure for drug trafficking represents a financial uplift that will shift the lack of profitability within the industry.

Charlie Bachtell, the acting chairman of the U.S. Cannabis Roundtable (USCR), said the alliance of cannabis companies that make up the USCR supports the legislation. Bachtell is also the CEO of Chicago-based multistate operator Cresco Labs.

“States being able to set their own cannabis policies is a critical component to developing a functional framework for the U.S. cannabis industry and is consistent with President Trump’s position and approach to cannabis policy that was laid out on the campaign trail,” Bachtell said in the release. “Forty states across the country have unique cannabis programs, and one size will not fit all when it comes to regulation. USCR supports this effort to put states at the forefront of cannabis policy and looks forward to working with Congressman Joyce on this legislation.”