The Columbian / Associated Press

Oregon lawmakers seek federal tax code change for legal marijuana

PORTLAND — Two members of Oregon’s congressional delegation plan to introduce bills that would allow marijuana businesses operating in compliance with state law to take federal deductions on taxes like other small businesses.

U.S. Sen. Ron Wyden and Congressman Earl Blumenauer say the legislation would alter a section of the federal tax code that prohibits anyone selling controlled substances from getting tax breaks. At a press conference on Thursday, the two legislators said they would introduce the bills next week.

Marijuana possession, sale and cultivation continue to be offenses under federal law.

Congress prohibited anyone selling controlled substances from getting tax breaks in 1982, after a drug dealer claimed his yacht and weapons as legitimate business expenses.

But Wyden and Blumenauer said times have changed, and federal law hasn’t caught up.

Last fall, Oregon joined Colorado, Washington state and Alaska and made pot legal for anyone over 21 to grow, buy and possess. Oregon is also one of more than 20 states to allow the use of medical marijuana, which in many cases is sold through dispensaries.

“This is about having equitable treatment for legitimate businesses and putting them on an equal footing,” Blumenauer said.

The bill likely faces an uphill battle. The Republican-led Congress has largely opposed marijuana legislation, and President Barack Obama, at a town hall in Jamaica, said: “I do not foresee anytime soon Congress changing the law at a national basis.”

There are more than 200 medical marijuana dispensaries in Oregon. Recreational possession and growing will start in July, while retail sales are not expected to start until next year.

Wyden and Blumenauer said the IRS rules are unfair and burdensome to marijuana business owners, who face tax rates of 70 to 90 percent. Many illegally take the deductions, or go out of business, they said.

“It drives so many people away from legal business and into the underground,” said Shane McKee, co-founder of Shango Premium Cannabis dispensary in Portland. “It makes many businesses unable to operate.”