Virginia Lawmakers Approve Bills On Marijuana Sales And 280E Tax Reform

Virginia lawmakers on Friday advanced bills to start adult-use marijuana sales and allow cannabis businesses to make certain tax deductions at the state level while they’re barred from doing so federally under the Internal Revenue Services (IRS) code known as 280E.

The 280E bill passed the Senate unanimously in a 40-0 vote, carried by Sen Adam Ebbin (D). The House of Delegates companion version from Del. Jeffrey Campbell (R) moved through an Appropriations subcommittee in a 7-1 vote and now heads to the full panel for consideration.

The legislation seeks to decouple Virginia’s marijuana industry from the federal tax code, as lawmakers in several states like New Jersey, New York and Pennsylvania have moved to do. State medical and recreational cannabis businesses would be able to take deductions at the state level that they’re currently barred from doing federally under IRS’s 280E.

Separately, in the Democratic-controlled Senate, the Rehabilitation and Social Services Committee voted 9-6 to refer an adult-use marijuana sales bill, also from Ebbin, to the Finance and Appropriations Committee.

There have been open questions about how the state legislature would address cannabis commerce for adults in the 2023 session after lawmakers approved a bill in 2021 legalizing marijuana possession for people 21 and older. That legislation included sales provisions but they were subject to reenactment, and lawmakers in 2022 did not act on the issue under the new Republican governor and GOP-controlled House of Delegates.

The House has since been a sticking point for advocates, with legislators largely divided on how to proceed with a possible commercial market. The legislation that passed a Senate committee on Friday would allow recreational cannabis sales to begin on January 1, 2024.

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Sales would take place through existing medical cannabis dispensaries as well as at new businesses run by people who live in “historically economically disadvantaged communities.” Those operators would receive training and support from current cannabis companies.

The revised legislation also includes for the resentencing of people currently incarcerated for cannabis convictions.

It’s unclear if the House might be willing to go along with the proposal if it ultimately clears the full Senate, which remains under Democratic control. GOP lawmakers have filed several bills meant to create a framework for regulated sales in recent weeks. A House subcommittee defeated an attempt to enact marijuana sales legislation early last year.

While some advocates such as those with Virginia NORML have pushed lawmakers to let sales begin as soon as possible so that consumers have access to regulated products, others have expressed concerns that giving existing medical cannabis businesses a head start in the recreational market could ultimately undermine equity for communities targeted by the war on drugs.

Marijuana Justice, which has been among the most vocal defenders of equity interests, said that the new substitute version of Ebbin’s sales legislation that advanced on Friday “reflected the concerns of the public around exclusive early sales and the criteria for opportunity,” calling the revised language “a huge win.”

“The latest substitute states that if medical operators were to start sales first, then a 1:1 ratio must be met of medical operators and small business franchisees,” the group said in an email to supporters. “There was also more clarity of who will meet criteria to receive cannabis opportunities in specific areas of Virginia.”

Meanwhile, the Senate also passed a bill earlier this month from Sen. Mark Obenshain (R) on Friday that generally seeks to apply alcohol advertising rules to ads for marijuana.

On Friday, the Senate Rehabilitation and Social Services Committee referred additional pieces of legislation to the Finance and Appropriations Committee Committee that deal with cannabis product safety, inhalable products, expanding cultivation operations and establishing a “Cannabis Incubator Project.”

The @vasenate Rehabilitation & Social Services Committee just advanced my SB 1366 to establish The Virginia Cannabis Business Incubator Project to support disadvantaged and undercapitalized farmers/entrepreneurs craft a boutique cannabis market. pic.twitter.com/pNQrtGZ37b

— Jennifer McClellan (@JennMcClellanVA) January 27, 2023

Additionally, a Senate Education and Health subcommittee voted to move two measures concerning the expansion and operation of the state’s medical cannabis program to the full panel.

Earlier on Friday, that same subcommittee soundly approved a bill to establish a statewide psilocybin advisory board and move the psychedelic to a lower schedule under state statute. The vote came about a week after a separate Virginia House of Delegates panel rejected a measure to legalize psilocybin for therapeutic use for people with serious conditions who obtain a doctor’s recommendation.

Gov. Glenn Youngkin (R) has said that while he’s not interested in re-criminalizing marijuana possession, he feels there’s “still work to be done” before he gets behind creating a market for commercial sales and production.

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