A top Republican lawmaker is making a move that could deal a financial blow to the cannabis industry—even if the federal government moves forward with plans to ease restrictions on the drug. Rep. Jodey Arrington (R-TX), who chairs the House Budget Committee, has introduced a bill that would block marijuana businesses from taking standard federal tax deductions, ensuring they remain ineligible under the IRS’s 280E tax code.
The timing is no accident. With discussions heating up over rescheduling cannabis from a Schedule I to a Schedule III drug, industry leaders have been banking on tax relief. But Arrington’s proposal—and his influence over budget negotiations—could keep those benefits permanently out of reach.
A Well-Timed Move With Big Implications
Arrington’s bill landed just weeks after Republican senators introduced a similar measure in their chamber. It would explicitly prevent marijuana businesses from claiming tax deductions, even if cannabis is reclassified under the Controlled Substances Act (CSA).
For businesses in the sector, this is more than a technical tax issue—it’s a major financial burden. Under 280E, companies involved in controlled substances listed as Schedule I or II drugs can’t deduct common business expenses like rent, payroll, or marketing. Rescheduling to Schedule III was seen as a game-changer for the industry because it would, at least in theory, remove those tax restrictions.
Now, the GOP is working to close that potential loophole before it even opens.
Can Arrington’s Bill Gain Traction?
It’s not yet clear whether the bill can pass on its own, but that might not matter. Arrington’s position as chair of the House Budget Committee gives him significant leverage, and he could push for the measure’s inclusion in broader budget legislation. That’s where the real fight might take place.
His stance on cannabis taxation appears to be driven by what The Washington Post describes as a “values perspective.” In other words, this isn’t just about tax policy—it’s about opposition to marijuana as a whole. That’s a key distinction because it suggests that even if economic arguments favoring tax relief for legal businesses gain traction, there will still be ideological opposition.
Who’s Backing the Bill?
Arrington isn’t going at this alone. His House bill has drawn support from a group of fellow Republican lawmakers, including:
- Rep. Blake Moore (R-UT)
- Rep. Pete Sessions (R-TX)
- Rep. Vern Buchanan (R-FL)
- Rep. Greg Murphy (R-NC)
- Rep. Chuck Edwards (R-NC)
- Rep. Gary Palmer (R-AL)
Notably, the Senate version was introduced by Sens. James Lankford (R-OK) and Pete Ricketts (R-NE). The bill’s name? The “No Deductions for Marijuana Businesses Act.” The branding makes the goal crystal clear—this is a direct move to prevent the cannabis industry from gaining tax parity with other legal businesses.
A Preemptive Strike Against the Cannabis Industry
The move comes at a critical time. While rescheduling isn’t a done deal yet—the Drug Enforcement Administration (DEA) still has to weigh in, and hearings have already been delayed—lawmakers pushing this bill are clearly trying to get ahead of any policy shifts that might benefit the industry.
Under current law, the IRS tax code applies 280E restrictions only to businesses dealing with Schedule I and II substances. If cannabis shifts to Schedule III, that restriction should be lifted. But this new bill aims to keep it in place by specifically carving out an exception to continue banning marijuana businesses from normal tax deductions.
Who’s Celebrating This Move?
Anti-cannabis advocacy groups are fully on board. Smart Approaches to Marijuana (SAM), a prohibitionist group, has taken credit for pitching the idea behind the Senate bill and is openly praising Arrington’s House measure.
For groups like SAM, this is about more than tax policy—it’s about keeping the marijuana industry from gaining mainstream legitimacy. By ensuring cannabis businesses continue to face financial roadblocks, they’re hoping to slow down the industry’s expansion, even as more states legalize the drug for medical and recreational use.
What’s Next?
For now, the text of Arrington’s bill hasn’t been released, but given the alignment with the Senate version, the key details are unlikely to hold surprises. The real question is whether this proposal gets fast-tracked into larger budget legislation. If that happens, the cannabis industry could find itself in an uphill battle, scrambling to preserve the financial relief it has long expected to come with federal rescheduling.
One thing is clear: Even as legalization efforts gain momentum, opposition forces are working just as hard to keep federal policies stacked against marijuana businesses.
