Pennsylvania lawmakers are advancing legislation to correct an omission in a law that unintentionally excluded dispensaries from state-level tax relief for the medical marijuana industry.

About three months after the legislature approved a budget bill that the governor signed containing tax reform provisions as a partial workaround to a federal ban on tax deductions for cannabis businesses, the House Finance Committee approved two versions of the measure that are now pending final floor action.

As enacted, the marijuana provision currently allows other licensee types such as growers and processors to take state tax deductions equivalent to what they’re denied under the federal Internal Revenue Service (IRS) code known as 280E. But while legislators intended to include dispensaries as well, there was a drafting error that was overlooked as the bill moved through the process.

The Legislative Reference Bureau (LRB), which is responsible for formatting legislation to ensure it complies with statute, evidently returned a copy of the legislation with the dispensary omission. There is a LRB process for correcting legitimate requested drafting mistakes. But because this error wasn’t caught before the bill was signed into law by Gov. Josh Shapiro (D), it required lawmakers to pass separate legislation in order to give dispensaries the state-level tax relief.

That’s what they’re doing now, with legislation to amend the current statute to add those with a “dispensary permit” to take state tax deductions.

House Finance Committee Chairman Steve Samuelson (D) had also introduced a standalone marijuana industry tax bill that advanced through the House in 2022 and did include dispensaries under the definition of an eligible “medical cannabis businesses.”

The budget legislation contained another omission—this one intentional—that also disappointed advocates. It did not contain language to legalize marijuana for adult use, despite that reform being requested in the governor’s own budget request.

Meanwhile, as states with legal marijuana markets continue to pass legislation giving licensed businesses state-level tax relief, the federal government is actively considering a Justice Department proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), which would mean that those companies would be able to finally take federal tax deductions.

This also comes amid heightened discussions about legalizing cannabis in the legislature.

Last month Reps. Aaron Kaufer (R) and Emily Kinkead (D) formally introduced a bipartisan marijuana legalization bill, alongside 15 other cosponsors.

In July, the governor of Pennsylvania said the administration and lawmakers would “come back and continue to fight” for marijuana legalization and other policy priorities that were omitted from budget legislation he signed into law that month.

Meanwhile, a top GOP Pennsylvania senator who has long expressed concerns about marijuana legalization told advocates on Tuesday that she’s against arresting people over cannabis, noting that the policy change could protect her son and disclosing that if it weren’t for marijuana, she might not have met her husband, according to an activist who spoke with her.

As Pennsylvania’s legislature reconvenes amid rising pressure to enact legalization, advocates view the comments from Senate President Pro Tempore Kim Ward (R) as a positive sign that the dam on cannabis reform measures might be weakening in the commonwealth.

A poll released last week found that strong majorities of Pennsylvania voters in five key tossup districts are in favor of legalizing marijuana in the state—and they want to see lawmakers enact the reform imminently.

At a press briefing in July, the chair of the Pennsylvania Legislative Black Caucus seemed to temper expectations about the potential timeline of passing legalization legislation, pointing out that the rest of the session will likely be too politically charged heading into the November election to get the job done this year.

Other lawmakers have emphasized the urgency of legalizing as soon as possible given regional dynamics, while signaling that legislators are close to aligning House and Senate proposals.

New data has also underscored the urgency of enacting cannabis reform, revealing that more than 12,000 people were arrested for cannabis possession in the Keystone state last year.

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Meanwhile, a report commissioned by activists projected that Pennsylvania would see up to $2.8 billion in adult-use marijuana sales in the first year of implementing legalization, generate as much as $720 million in tax revenue and create upwards of 45,000 jobs.

Sens. Sharif Street (D) and Dan Laughlin (R) also participated in an X Spaces event in June where they said the votes are there to pass a marijuana legalization bill as soon as this year, though they stressed that the governor needs to work across the aisle to get the job done—and argued that it would be helpful if the federal government implemented its proposed cannabis rescheduling rule sooner rather than later.

Street was also among advocates and lawmakers who participated in a cannabis rally at the Pennsylvania State Capitol in June, where there was a significant emphasis on the need to incorporate social equity provisions as they move to advance legalization.

Laughlin, for his part, also said an event in May that the state is “getting close” to legalizing marijuana, but the job will only get done if House and Senate leaders sit down with the governor and “work it out.”

Warren County, Pennsylvania District Attorney Robert Greene, a registered medical cannabis patient in the state, filed a lawsuit in federal court in January seeking to overturn a ban preventing medical marijuana patients from buying and possessing firearms.

Two Pennsylvania House panels held a joint hearing to discuss marijuana legalization in April, with multiple lawmakers asking the state’s top liquor regulator about the prospect of having that agency run cannabis shops.

Also in April, members of the House Health Committee had a conversation centered on social justice and equity considerations for reform.

At a prior meeting in March, members focused on criminal justice implications of prohibition and the potential benefits of reform.

At another hearing in February, members looked at the industry perspective, with multiple stakeholders from cannabis growing, dispensing and testing businesses, as well as clinical registrants, testifying.

At the subcommittee’s previous cannabis meeting in December, members heard testimony and asked questions about various elements of marijuana oversight, including promoting social equity and business opportunities, laboratory testing and public versus private operation of a state-legal cannabis industry.

And during the panel’s first meeting late last year, Frankel said that state-run stores are “certainly an option” he’s considering for Pennsylvania, similar to what New Hampshire Gov. Chris Sununu (R) recommended for that state last year, though a state commission later shied away from that plan.

Last year, Shapiro signed a bill to allow all licensed medical marijuana grower-processors in the state to sell their cannabis products directly to patients.

Separately, Pennsylvania’s prior governor separately signed a bill into law in July 2022 that included provisions to protect banks and insurers in the state that work with licensed medical marijuana businesses.

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