A Republican congressman has introduced a revamped version of a bill to end federal marijuana prohibition in legal states, legalize interstate cannabis commerce, normalize Internal Revenue Service (IRS) policy for the industry and contemplate a federal tax-and-regulate framework for the industry.
Rep. Dave Joyce (R-OH) refiled the Strengthening the Tenth Amendment Through Entrusting States (STATES) 2.0 Act on Thursday. It’s being cosponsored by Reps. Lori Chavez-DeRemer (R-OR), Brian Mast (R-FL), Earl Blumenauer (D-OR), and Troy Carter (D-LA).
Like the version he sponsored last session, the bill would amend the Controlled Substances Act (CSA) to undo federal criminalization of people acting in compliance with state cannabis programs, as well as those operated by Indian tribes. But STATES 2.0 would also go further, in part by authorizing interstate marijuana commerce and calling for a currently unspecified federal tax on cannabis sales to support regulations and enforcement.
“The current federal approach to cannabis policy infringes on the rights of states to implement their own laws, stifling critical medical research, hurting legitimate businesses, and diverting vital law enforcement resources needed elsewhere,” Joyce, co-chair of the Congressional Cannabis Caucus, said in a press release. “The STATES Act does what every federal bill should do—help all 50 states succeed. This bill respects the will of the states that have legalized cannabis in some form and allows them to implement their own policies without fear of repercussion from the federal government.”
The text of the bill says that states and tribes should be able to “enact time, place, and manner restrictions that help to aid small and craft businesses, impose regulations for health and safety, keep cannabis businesses away from schools, and generally fit with the character and values of the community.”
“While States have the power to determine what happens within their own borders, they cannot make laws permitting or restricting interstate commerce unilaterally,” the legislation says. “In the absence of Federal movement, the illicit interstate trade in cannabis has persisted even in the face of significant State policy changes. The Federal Government should be responsible for regulating and tracking this interstate trade to ensure cannabis does not end up where it does not belong.”
To that end, the feds should “require a framework that supports critical components such as proper administration and oversight, consumer safety protections, and enforcement,” which the bill says should be supported by a modest federal excise tax on cannabis and overseen by the Alcohol and Tobacco Tax and Trade Bureau (TTB).
The legislation does not include provisions mandating such a tax, though its findings section says the rate should “be low enough to not exacerbate the level of taxation set by States, thereby avoiding the pyramid effect of adding Federal taxes on top of high State taxes.” The tax should also “offset the costs of executing the administrative functions of a Federal regulatory framework for marijuana, including requirements for testing, enforcement and policing, youth prevention, and substance abuse prevention and education,” the bill says.
Importantly, the revised bill would prevent states and tribes from prohibiting the transportation of cannabis through their borders from a legal jurisdiction to another legal jurisdiction. Origin and destination jurisdictions, meanwhile, could “impose reasonable restrictions” within their borders “on the manufacture, production, possession, distribution dispensation, administration, or delivery of marijuana,” the bill says.
Additionally, the STATES Act would make it so revenue from marijuana sales in regulated state markets “shall not be subject to section 280E” of the IRS code, which currently prevents the industry from claiming federal tax deductions available to other traditional markets.
That represents a key issue for the industry, which has also been pushing Congress for years to advance a different bipartisan bill—the Secure and Fair Enforcement (SAFE) Banking Act that Joyce is also leading this session.
The new STATES Act legislation stipulates that the attorney general would have 180 days from enactment to finalize a rule amending the CSA to exempt states and tribes from federal marijuana prohibition.
It would further maintain Food and Drug Administration’s (FDA) role in regulating cannabis that’s marketed as a drug, food item, dietary supplement or cosmetic, and it would prohibit marijuana from being combined with “adulterated” products, including alcohol and tobacco. The Health and Human Services secretary would have 180 days to issue a rule on cannabis product regulation, including requirements for contaminant testing, manufacturing and marketing.
The bill also specifies that anyone who ” knowingly or intentionally manufactures, produces, possesses, distributes, dispenses, administers, or delivers any marijuana in violation of the laws of the State or tribe in which such manufacture, production, possession, distribution, dispensation, administration, or delivery occurs” or who employs a minor to handle cannabis would still be subject to federal prosecution.
The Government Accountability Office (GAO) would be required to carry out a study looking into the effects of cannabis legalization on traffic safety and submit a report to Congress with its findings within one year of enactment.
The findings section of the bill additionally expresses the sense of Congress that FDA support “tribal self-determination and self-government with respect to marijuana regulation.”
“I am proud to have worked on multiple iterations of the STATES Act with my friend Dave Joyce,” Blumenauer, founding co-chair of the Cannabis Caucus who recently announced he will not be seeking re-election next year, said. “Cannabis reform benefits from such true bipartisan engagement. I look forward to our work to make the federal government a better partner to the states of all political stripes leading the path forward.”
Mast, another caucus co-chair, said that the U.S. Constitution “never says the word ‘cannabis,’ but it does say clearly that all powers not explicitly given to the federal government remain with the states.”
“Cannabis policy should be based on that: 50 states should be able to set 50 different policies that are going to be best for their constituents, and that’s exactly what the STATES Act will do,” he said.
Chavez-DeRemer added that, with a growing number of states enacting legalization, it’s “more important than ever to create a safe and professional environment for one of the fastest-growing industries.”
The prospects of advancing any level of marijuana policy reform this Congress are in doubt. The Senate Banking Committee passed a marijuana banking bill in September, but it’s pending floor action, and there’s an open question about whether House GOP leaders would be willing to take it up.
Senate Majority Leader Chuck Schumer (D-NY) said late last month that bringing the marijuana banking bill to the floor is a matter of securing more GOP votes—a task he says is made more difficult by the fact that some lawmakers are afraid that their constituents, “particularly the older ones,” don’t want them to embrace reform despite overall majority voter support.
Meanwhile, as lawmakers continue to push for the SAFER Banking Act, a coalition of 20 congressional Democrats is urging Treasury Department officials to update federal guidance to prevent financial institutions from discriminating against marijuana business owners over prior cannabis-related activity that’s since been made legal at the state level.
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