S.Amdt. 1639

SA 1639. Mr. GARDNER submitted an amendment intended to be proposed
to amendment SA 1618 proposed by Mr. McConnell (for Mr. Hatch (for
himself and Ms. Murkowski)) to the bill H.R. 1, to provide for
reconciliation pursuant to titles II and V of the concurrent resolution
on the budget for fiscal year 2018; which was ordered to lie on the
table; as follows:

At the appropriate place, insert the following:

SEC. __. EXCEPTION FOR EXPENDITURES IN CONNECTION WITH
CERTAIN CANNABIS RELATED TRADES OR BUSINESSES.

(a) In General.--Section 280E of the Internal Revenue Code
of 1986 is amended--
(1) by striking ``drugs'' and all that follows through ``No
deduction'' and inserting ``drugs

``(a) General Rule.--Except as provided in subsection (b),
no deduction''; and
(2) by adding at the end the following:

``(b) Exception for Certain Cannabis Related Trades or
Businesses.--
``(1) Exclusion from trafficking.--Those activities
undertaken in connection with a qualified cannabis trade or
business shall not be considered trafficking in controlled
substances for purposes of subsection (a).
``(2) Definitions.--For purposes of this subsection:
``(A) Cannabis related trade or business.--The term
`cannabis related trade or business' means a trade or
business that earns cannabis related income.
``(B) Cannabis related income.--The term `cannabis related
income' means any income earned from the manufacture,
production, cultivation, processing, refinement,
transportation and delivery, distribution, testing, use,
sale, or exchange of cannabis or cannabis-derived materials.
``(C) Qualified cannabis related trade or business.--The
term `qualified cannabis related trade or business' means a
cannabis related trade or business that meets the following
requirements:
``(i) The activities giving rise to the cannabis related
income of the trade or business are properly regulated under
the laws of the State in which they are conducted.
``(ii) No cannabis or cannabis-derived materials owned by
the trade or business are sold, exchanged, provided free of
charge, gifted, donated, sampled, embedded in the sale of
another item, embedded within the provision of a service, or
otherwise transferred in a manner that does not give rise to
cannabis related income.
``(iii) None of the activities of the trade or business are
trafficking in controlled substances other than cannabis or
cannabis-derived materials regulated under State law.
``(iv) To the extent that the cannabis related trade or
business was in existence prior to the date of enactment of
this subsection, the person who held or controlled a license
described in paragraph (3)(A) in taxable years ending before
such date of enactment has not had a cannabis license revoked
by State licensing authorities.
``(3) Properly regulated.--The term `properly regulated'
means, with respect to a qualified cannabis related trade or
business, the following:
``(A) Persons engaged in the activities giving rise to the
cannabis related gross receipts are licensed by the State in
which they conduct such activities and such license is
subject to periodic renewal.
``(B) State licensing rules impose limitations on the
production and distribution of cannabis and items derived
from cannabis.
``(C) State licensing rules restrict the distribution of
cannabis and items derived from cannabis to minors,
including--
``(i) a minimum age on legal purchases of 18; and
``(ii) restrictions on advertising, marketing ,and
promotional activities that are at least as stringent as
those imposed on alcohol products in the State.
``(D) Sufficient books and records are employed by the
cannabis related trade or business--
``(i) to enable the seed to sale identification of all the
cannabis or cannabis derived materials owned or used in
connection with the manufacturing, production, growth,
processing, refinement, distribution, testing, use, sale, or
exchange activities of the cannabis related trade or
business; and
``(ii) to enable the association of the income of the
cannabis trade or business with the cannabis or cannabis
derived materials identified in accordance with clause (i).
``(E) Personal use exemptions to the State licensing
requirements, if any, contain limitations similar to those
contained in section 5053(e), applied--
``(i) by limiting the definition of any permissible
transfer to another person, whether by sale, exchange, gift,
sharing, concurrent use, or otherwise, to transfers between
the persons who constitute family members within the meaning
of section 267(c)(4) and who are not minors; and
``(ii) by substituting 8 plants for 200 gallons in each
place it appears for applying a household limitation
involving more than 1 adult and 4 plants for 100 gallons in
each place it appears for applying a household limitation
involving only 1 adult.
``(F) State licensing rules limit caregiver, agency,
designation arrangements, cooperative agreements, or any
other arrangement involving cannabis or cannabis derived
materials purporting not to involve a trade or business to 8
plants per patient or person per calendar year.
``(4) Application to persons engaged in more than one trade
or business.--The activities of all persons who are related
parties within the meaning of section 52 shall be taken into
account in applying this subsection.''.

(b) Effective Date.--The amendments made by this section
shall apply with respect to taxable years ending after the
date of the enactment of this Act.
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