It was announced on December 11, 2018 that the Agriculture Improvement Act of 2018 (AIA) is through reconciliation between the House and the Senate. The bill removes “hemp” from the definition of “marihuana” under the Controlled Substance Act (CSA). This effectively makes the cultivation, processing, extraction, manufacture, and retail of hemp legal under Federal law.
Hemp is defined in the AIA as “the plant Cannabis sativa L. and and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Plain English: if the THC content of a Cannabis sativa L. plant or its byproducts is less than 0.3%, then it is considered “hemp”, not “marihuana”, and is effectively legal.
What does this mean for hemp businesses?
The 2014 Farm Bill allowed for cultivation and study of industrial hemp provided it was part of a pilot program in the business owner’s state. However, the material itself was still part of the definition of “marihuana” under the CSA. Accordingly, business owners were subject to Internal Revenue Code Sec. 280E which prohibits deductions against gross income for drug trafficking businesses. (See DKB blog post on Illegal Businesses) If this bill makes it through Congress, and is signed by President Trump, the 280E issue falls off the table.
When is this effective?
The hemp section of the AIA does not specifically define an effective date of the change. However, the bill is largely centered around extending or modifying provisions which expire at the end of 2018, so it seems likely that it would be effective January 1, 2019.
As the legislative and executive process unfolds, DKB will push updates.
