Cannabusiness Advisory

Last week, the cannabis industry celebrated as the House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act (the “MORE Act”), which decriminalizes cannabis on the federal level and provides retroactive expungement for certain marijuana offenses.

The passage of the MORE Act by the Democrat-led House illustrates a shifting perspective at the federal level upon the cannabis industry as a whole. If the MORE Act gets signed into law, the decriminalization of cannabis will open up several opportunities and benefits to those in the existing cannabis industry as well as encourage new participants. In theory, this sounds like a win. In reality, the House vote is merely the first step in a long process to affect any tangible change.

The MORE Act’s most well-known measure is to remove cannabis from Schedule 1 of the federally controlled substance list, which decriminalizes cannabis. While this would legalize cannabis on the federal level, the measure does not equate to a nationwide and uniform approach. It will be up to each state to legislate and regulate its own respective cannabis programs.

The bill also affords the cannabis community greater access to government resources such as Small Business Administration loans and demographic tracking from the Bureau of Labor Statistics. Furthermore, the Act would allow qualified veterans access to medical marijuana with a recommendation from the Veterans Affairs health program.

As previously covered in the September 23^rd edition of Burns and Levinson’s CannaBusiness Advisory Blog, the cannabis industry is entrenched in the pitfalls of Section 280E tax treatment. Section 280E of the Internal Revenue Code taxes the existing cannabis industry as an illegal business rate with an effective 70% tax rate.  With the decriminalization of cannabis, the unfair 280E tax treatment for the legal cannabis industry is eliminated. The MORE Act would initially charge a 5% federal tax on cannabis products (excluding prescriptions), where the tax revenues would be used to fund several grant programs in an effort to remedy those disadvantaged by the war on drugs.

While the MORE Act is a positive step in the right direction for marijuana reform and social equity, it has its imperfections. A last-minute amendment slipped into the bill that prohibits someone charged with a cannabis-related felony from participating in the industry.  Steve Hawkins, the Marijuana Policy Project’s Executive Director commented, “It falls short of a perfect bill and at least one provision can hopefully be removed before final enactment … This policy could block many of those individuals accused of prior marijuana offenses from participating in the legal market, which will inhibit our ability to create an equitable and fair marijuana industry. The fact that it might apply to people who were never even convicted of a crime makes it particularly unacceptable.” Hawkins further said, “Not only does this requirement violate both the spirit and intent of this historic legislation, but it is also strongly at odds with many of the provisions contained in MORE itself, including the expungement of records and efforts to remove barriers from past convictions.”

The next monumental challenge for the MORE Act is Senate approval. However, it may be too early to celebrate. Most Americans would bet that the Republican-led Senate will block the MORE Act from approval due to Senate Majority Leader, Mitch McConnell’s (R-KY) widely publicized disdain for cannabis legalization. Now, all eyes are on Georgia’s election runoff, where it’s still possible that two Democrats could win two of the currently Republican-held Senate seats. If both Democratic candidates win in Georgia, the result would flip the Senate, from Republican to Democrat. Finally, if the Democrats do take the Senate majority, the chances that the MORE Act will pass into law exponentially improve.

If you’d like more information on the MORE Act, or how it may potentially affect your business, please reach out to a member of the Burns & Levinson CannaBusiness Advisory team.