No Deductions for Marijuana Businesses Act

No Deductions for Marijuana Businesses Act would amend the Internal Revenue Code to keep and codify the rule that marijuana businesses (and other listed controlled substances businesses) cannot claim deductions or credits for ordinary business expenses. Specifically, it would modify Section 280E so that no deduction or credit is allowed for amounts paid or incurred in conducting a trade or business if that business involves trafficking marijuana or Schedule I/II controlled substances, regardless of state authorization or federal enforcement concerns, as long as the activities are prohibited by federal law or the law of the state where the business operates. The change would apply to amounts paid or incurred after the date of enactment for taxable years ending after that date. In practice, this would reinforce the current federal tax treatment that cannabis-related businesses face much higher effective tax rates because many ordinary business deductions (rent, payroll, utilities, etc.) are disallowed. The bill also clarifies definitions around marijuana (as defined in the Controlled Substances Act) and Schedule I/II substances, linking the rule to both federal law and state-law contexts in which the business operates. The sponsor group includes Rep. Arrington and several co-sponsors, and the measure has been referred to the Ways and Means Committee.