Marijuana tax law reform: Grover Norquist and Dana Rohrabacher boost the ultimate pot bill.

Grover Norquist and Dana Rohrabacher Advocate for Ultimate Marijuana Bill

Grover Norquist and Dana Rohrabacher Advocate for Ultimate Marijuana Bill

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March 13 2014 4:54 PM

Cheech and Chong and Reagan

The marijuana lobby searches for conservatives who hate taxes more than they hate drugs.

Dana Rohrabacher
Former Reagan speechwriter Dana Rohrabacher, now a Republican representative from California, is mellow about the advent of legal marijuana.

Shuji Kajiyama/AFP/Getty Images

The “ultimate marijuana bill” sits on a table, next to crudités and crackers but at a safe distance from the red wine. It’s Tuesday evening inside the new office of the Marijuana Policy Project, where the small but ambitious cannabis lobby has cloistered before swarming Capitol Hill. Rep. Dana Rohrabacher, R-Calif., who co-wrote the “ultimate marijuana bill,” is filling his cup before giving a short speech. Ben Wu, the young CEO of a new California-based company called Kush Bottles, is telling me why his product can lock marijuana away from minors and transform the image of the pot business.

David Weigel David Weigel

David Weigel is a reporter for the Washington Post. 

“All it takes is one bad event to get on CNN and discredit the industry,” he says.

Rob Kampia, the longtime executive director of MPP, quiets down the room and waves the ultimate bill—H.R. 1523, the Protect State Marijuana Laws Act—in the air. “If you’re reading-impaired,” he says, “this is how long it is.” It’s one page long, and would clarify that some federal drug laws did "not apply to any person acting in compliance with State laws relating to the production."* 


“Very complicated,” interjects Rohrabacher. “Even a congressman can understand it.”

Over a few days this week, the National Cannabis Industry Association started a third year of selling Congress on quasi-legal federal recognition of marijuana. There are a few ways of doing this; H.R. 2240, also co-sponsored by Rohrabacher and Democrats, would end the tax code's current prohibition on deductions or credits for businesses dealing with controlled substances, for any “marijuana sales conducted in compliance with State law.”​ Sixty-five representatives of the 450-member business association RSVP’d for the push. Most of them made it to the Hill.

Michael Correia, who’s been NCIA’s director of government relations for just a few months, came from the office of Rep. Diane Black, R-Tenn., and is now trying to sell just enough of the party on an issue that many of them identify as part of the rot of the 1960s. Kampia tells his audience—cannabis product manufacturers, lobbyists, and possible Rohrabacher donors—that their goal is to “ultimately change the law so that marijuana is regulated like alcohol.”

Rohrabacher has been trying at this for a decade, not getting very far. “I was Ronald Reagan’s speechwriter,” he tells the crowd. “If you take a look at Ronald Reagan’s speeches on drugs, and if you looked real close, you can tell which ones I worked on. Reagan would make it clear that our goal was not to put people in jail.”

But the new cannabis lobby’s first problem comes straight out of the tough-on-crime push of the Reagan years. In 1982, the start of his iteration of the “war on drugs,” Reagan approved 280E, the line of tax law that prevents drug profit tax deductions. For decades it was a useful legal tool against dealers and an occasional source of would-you-believe-it news about people hiding their drug money.

Only this year, with the birth of the legal marijuana industry in Colorado and Washington state, has this law produced the sort of victim that Congress tends to protect. Legal dispensaries are making millions and are unable to deduct the profits. They can’t convince banks to take their money or place ATMs in their stores. After a few weeks of Colorado sales, the Department of Justice issued a memorandum to prosecutors, asking them to lay off and let banks work with the dispensaries.

“You can’t deduct rents, payroll, so it’s been a tough sale for us to come out and get capital from investors,” says Pete O’Neil, managing partner of Seattle’s C&C dispensary.

O’Neil got lucky. “We had to register with the SEC after we did our first sale,” he says. “I had to call to file it, and I said, ‘Hey, I’m trying to get information about the Form B.’ The guy on the line said, ‘What are you doing?’ I said, ‘I own a legal marijuana dispensary.’ He says, ‘Stay on hold.’ I think: ‘Oh, shit.’ He comes back, and he’s like, ‘Mr. O’Neil, can you repeat what you just said to me?’ I repeat it, and I hear the other guy on the line say, ‘Oh man, isn’t that cool?’ ” O’Neil laughs at the memory. “Thank God for stoners.”

But the industry can’t rely on stoners alone. “We have turned a corner,” says Rohrabacher. “This issue is no longer a counterculture issue. Always, in the past, when you talked about marijuana, you’d have someone say, ‘Whoa man, what’s going on here?’ ” The congressman from Orange County summoned his best Tommy Chong impression and puffed an invisible joint. “In fact, the turning point in public opinion has happened just in time. For the first time, the polls indicate I’m actually gaining votes by taking this stand on marijuana. How stupid it is to spend billions and billions of dollars, all of the time of our courts, to prevent someone from smoking a weed they can grow in their backyard?”

On Wednesday morning the lobbyists headed to Congress, armed with talking points and a letter from Grover Norquist. In September the president of Americans for Tax Reform had asked House Ways and Means Committee Chairman Dave Camp to support the ultimate marijuana bills. “H.R. 2240 corrects a mistake in the tax code Congress never intended to create,” wrote Norquist. “In an attempt to deny tax deductions connected to the illegal drug income of street dealers, Congress accidentally imposed a gross receipts tax on legal cannabis dispensaries a generation later.”

“Grover is totally on board with fixing 280E,” says Blayne Sapelli, a 25-year-old working on a smoke-free cannabis startup and lobbying members of Congress from Connecticut. “That’s pretty sweet.”