Hemp in the Post-War Era: The Hemp Millers' Exemption from Marihuana Taxes

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In 1945, the Bureau on Narcotics and Dangerous Drugs (BNDD) attempted to implement unreasonable regulations on hemp cultivation in the United States. Guards would be required to protect the hemp at the mills, and that any hemp leaves or tops that remained on the plant during its transfer from the field to the mill would constitute a violation of the law. (1)

The hemp industry complained to Congress. Senator Robert La Follette, Jr., chairman of the Senate Finance Committee, held hearings on the problem on May 24, 1945. Eventually the entire Senate agreed that the hemp industry deserved protection from arbitrary law enforcement regulation, and adopted amendments of La Follette’s exempting hemp millers from important provisions of the Marihuana Tax Act of 1937.

On March 23, 1945 James J Biggins, district supervisor, District No 9, Treasury Department, Bureau of Narcotics had sent the following letter to the Matt Rens Hemp Co. of Brandon Wisconsin.

“Gentlemen: The Bureau of Narcotics has been informed by field officers that the growers of hemp have been transferring to the mills plants from which all of the flowering tops and leaves have not been separated. This is a violation of the law and subjects the transferor to severe criminal as well as civil penalties. The purpose of this letter is to inform you that the Bureau cannot and will not permit the tax-free transfer of hemp plants containing foliage from the producer to the mill, with respect to 1945 or succeeding crops.” (2)

This new interpretation of the Marihuana Tax Act of 1937 subjected the hemp industry to new and substantial taxation. In 1946 Congress passed the Administrative Procedures Act to protect private interests from arbitrary, unreasonable, and capricious regulations, or regulations that exceed an agencies statutory authority. However these new hemp regulations were issued in 1945 and the only avenue of appeal for the hemp industry was to go straight to Congress. Following the end of the Gillette hearings on fiber utilization and their high hopes for hemp’s future in the US by a mere seven months, the industry found support on both sides of Capital Hill.

Minnesota Rep. O’Hara, who also spoke to the 1944 Gillette hearings, first addressed the 1945 hearings. In response to the complaints that he received from the industry, he met with Mr. Anslinger and others at the Division of Narcotics and described the “harsh burden” created by the requirement to guard hemp at the mills. That conference did nothing to resolve the problems created by Anslinger’s unhelpful attitude. O’Hara asked the Senate Committee to consider a reasonable action that would not harass and embarrass legitimate hemp growers while still protecting the public.

Senator La Follette then thought it would be appropriate if he made a statement on the legislative history of the Marihuana Tax Act under which the Bureau of Narcotics issues its regulations concerning the hemp industry. After noting that Kentucky grew hemp for most of the 19th century, and hemp had been produced continuously in Wisconsin since 1916, he reviewed the war time production of hemp for 42 government owned scutching mills.

La Follette than recalled that when the Marihuana Act was passed in 1937, United States Treasury representatives assured the committee that the legislation would not interfere with the legitimate production of hemp and quoted Commissioner Anslinger’s testimony in 1937 that the hemp industry was protected under the Act.

Hemp was being raised in 1945 the same way it had been in 1937, and the industry has operated during these years without causing any need for new regulations. Furthermore, it was the experience of these private producers of hemp which provided this valuable fiber during both World Wars. Because this industry had made a substantial contribution to the country’s rapid naval expansion during the war; it was important to La Follette that their legitimate interests not be abandoned by the United States Congress.

A high percentage of leaves drop off of the hemp stalk during the retting process, when the stalks are left spread in the fields for the natural lignin to decay, allowing the separation of the fiber from the stalk at the mill. Because dew-retting depends on weather conditions, there is no economical way to insure that a fixed percentage of leaves are removed from the “straw” before it is sent to the mill for processing. The Treasury had decided that any remaining leaves were now marijuana subject to taxation. According to La Follette:

“the farmers and businessmen in requesting this hearing have indicated that they have no desire to enter into a discussion of the narcotic effects of marihuana. This hearing will be confined to a discussion of the problem of the production of hemp fiber for industrial purposes along with the uses of this fiber in the postwar periods.” (3)

Commissioner Anslinger was nursing a bad back at home in Pennsylvania when the hearings took place. La Follette expressed regret that Anslinger could not attend the hearing, and planned to call Anslinger’s deputy, Will Wood, after hearing from some witnesses from out of town representing the hemp industry.

Matt Rens’ hemp company built their first hemp mill in Wisconsin in 1916. During the last few years of the war their supplying farmers made $90 to $100 per acre net profit after paying for seed and harvesting. Rens explained to the committee the nature of the leaves the Treasury Department was attempting to subject to the Marihuana Tax Act of 1937.

“Retting . . .also deteriorates the flowery top and the leaves. Anybody that knows something about farming knows what water and rain do to hay if it is left out. This does the same thing to the leaves. . . if this hemp has been out in the weather for from 4 to 12 weeks, depending on the rain . . . these leaves are practically worthless, they disappear to a large extent, and what remains on the stalk is really just crumpled up, it is the shriveled-up remnants of what formerly had been leaves.” (4)

Since the Marihuana Tax Act was enacted, Rens reported, growers have been paying attention to achieving a more uniform ret, thus removing more of the leaves. However the industry cannot operate if law enforcement considers these shriveled up remnants of leaves to be marihuana.

“Personally, I do not think that the Bureau fully realizes what it means to us. In the 30 years we have operated and grown large acreages we have never heard of one instance where there was an illicit use made of the leaves of this hemp plant.” (5)

D.E. Wren of the J. Leroy Farmers Hemp Mill, Beaver Dam Wisconsin, also testified before the committee. This firm had been in operation since 1930, steadily increasing acreage annually well before World War II began. The mill invests in Kentucky hempseed and leases it out to licensed farmers. Wren explained that there was routinely a large investment in seed; farmers were not charged until the crop was processed. The mill supervises the growing, the cutting, the turning, and the tying. The farmers process the land and sow the seed. The harvesting is done with machinery supplied by the mill, and operated by their personnel.

“When we are trimming the hemp or tying it the machinery is moving or shaking it and a lot of those leaves that have dried fall off onto the fields, fall free of the stalk. Of course, there are a few leaves left but they are all deteriorated, after it has been lain in the fields from 4 to 12 weeks.” (6)

V.A. Batzner represented the Minnesota Hemp Company before the committee. They were contacted in May of 1944 and told that the 1945 crop had to be sufficiently free of leaves to pass inspection.

“Prior to this time we had never been bothered by the Narcotics Bureau. But their attitude from that time on seemed to be that they were going to insist that the stocks be entirely free of leaves or else the tax would apply. Well, we protested quite a bit, naturally, . . . very recently . . . they would permit us to have 10% leaf retention.” (7)

The company felt this was still unfair, because the amount of leaf remaining after retting was subject to so many environmental and weather-related factors “so that sort of thing is in the hands of the Almighty.” Operating under the new regulations is too hazardous for the company, because they don’t know if the leaves in any year are going to comprise 12%, 10%, 8% or some other proportion of the crop.

Samuel McCory was the director of the hemp division in the Agriculture Department, and was called on by the committee as an expert in the World War II hemp program. He also testified that it was not possible to eliminate all the leaves during the retting process.

“It appears that if the hemp industry is to continue in this country that some provisions should be made to permit the hemp plant to be brought from the farm to the hemp mill where it can be processed. The leaves are disposed of in the milling operation and are not a source of danger after that point.” (8)

McCory also volunteered that the United States should remain competitive in the soft fiber production and industry. He described the market as “a highly competitive situation” and McCory believed that it was in the country’s interest to keep a hemp industry. He did not want to create more obstacles in the way of the people who are going to grow hemp, now create requirements that increase their cost and place them at a disadvantage. Questioned by Senator Guffey, McCory testified that he also knew of no attempt to secure hemp leaves or blossoms for drug purposes at the government-owned or privately-owned hemp mills.

La Follette kept the witnesses coming. A representative from the Bureau of Plant Industry, Soils, and Agricultural Engineering testified that there was no efficient way to eliminate all the leaves before movement of hemp from the field. The same problem existed with cotton. An economic specialist from the Agriculture Department, George Farrell, also testified. He too was bullish on the future of American Hemp. Farmer explained that there were developments of new machinery that indicate that hemp could be economically handled in the making of cloth within the United States and noted that hemp production was expanding throughout the world. Farrell also explained that hemp was in competition with corn for farmland, and that in the non-wartime economy hemp would provide a farmer with a little more income than corn. (One reason hemp production did not thrive after the war is that tremendous increases in corn yields made hemp less attractive to farmers.)

After hearing the preceding testimony, the committee was finally ready to hear from the representative of the Bureau of Narcotics, Deputy Commissioner Will S. Wood. After apologizing that Commissioner Anslinger was resting a sprained back at this Pennsylvania home, Wood explained that the Bureau regarded marihuana enforcement as a very important matter. Asked to explain the new regulations, Wood explained that at the time the law was passed the industry testified that 90% of the leaves or better were lost in the retting process, and that rather than a formal regulation this threshold had been an implicit standard since the passage of the Marihuana Tax Act.

At this point La Follette and Wood began to argue over what the formal regulations actually were. B. T. Mitchell, a lawyer for the Narcotics Bureau, interjected to explain that the fine print of the definition of marihuana only excludes the stalks, not the leaves, and that this is the basis for the Bureau’s position that the law requires that all leaves stay in the field.

“You note that the mature stalks are exempt, and it is my understanding that that was written in that manner on the representations of the hemp growers that they could ret it in such a manner that the leaves and tops would be removed.” (9)

La Follette asked Mitchell if this meant their position was that a mature stalk was a stalk with no leaves, and he confirmed that this was the Bureau’s interpretation of the statute. Asked to reconcile this position with the 1937 testimony of Commissioner Anslinger, Mitchell repeated that the hemp industry had told them that retting would destroy all the leaves. La Follette continued on:

“Because it is perfectly clear if you read those Senate committee hearings that the Senate Committee was very much concerned to be certain that in enacting this drastic piece of legislation they weren’t putting the Bureau in a position to wipe out this legitimate hemp industry.” (10)

When Wood responded that “of course, the Bureau doesn’t want to do” this, La Follette referred to the day’s prior testimony. “They say that your regulation of March, or your letter of March, whatever you want to call it, and I will accept your terminology, is going to put the industry out of business.” (11)

Wood meekly replied that it was just a letter that notified growers they would have to ret the stalks in the field.

La Follette was undeterred.

“Just a letter, but that puts them on notice that if they take a single bundle of hemp out of the field after it is retted and you can find that there are [too many] leaves on it, they are liable to a tax that would wipe out anybody that was in business and all of their children for three or four generations by reason of the fact that they have to pay the tax. The very fact that these men are so concerned about it is an indication that they have been endeavoring to comply with the law.” (12)

Asked point blank by La Follette “what promoted the order of the letter”, Wood said he did not know, and neither did Mitchell. The Bureau representatives asked the committee to delay any legislative action until Commissioner Anslinger himself could discuss it with them and answer their questions about the Biggens letter. According to Wood the Commissioner “handled that himself.”

However La Follette had other plans, and his next action was to request that the committee’s legislative counsel explain to the committee proposed amendments to other drug-related legislation before the committee, HR 2348. These amendments would exempt hemp millers from provisions of the Marihuana Tax Act of 1937. Specifically, “the amendment that is drafted here proposes to exempt from tax the transfer of the plant when it is transferred from the farmer to the miller, who produces fiber from the stalk. That exemption will be applicable whether or not any leaves are still left on the stalk.” The amendments also require the millers to register and pay a $1 per year tax.

The full Senate adopted these amendments on July 21, 1945 after floor remarks by Sen. La Follette, who described the problem of unfair marihuana law enforcement on the hemp industry and continued: “This raised the question whether it was necessary to enact some new legislation which would make it possible for this not large but very essential industry to move forward.” (13)

La Follette also wanted to emphasize on the Senate floor that these amendments did not conflict with the public interest. “I may also state, Mr. President, that I do not believe there is any evidence of a substantial character that any of the persons who have engaged in this legitimate industry have been the source of illicit traffic in marihuana.” (14)

The Senate then insisted in conference on the adoption of the amendments by the House of Representatives. The House agreed during conference to accept the Senate Amendments and Public Law 320 was passed on March 8, 1956, adding the following provisions to the US Code: 26 USC 4742 (c), 26 USC 4751 (6), and 26 USC 4753 (b). These Millers Exemptions were retained by Congress in the Internal Revenue Act of 1954, and remained in the statutes until passage of the Controlled Substances Act in 1970 eliminated the use of prohibitory taxes to prevent marijuana production.


(1) Hemp and Marihuana: Hearings before the United States Senate Committee on Finance, Seventy-Ninth Congress, first session, on May 24, 1945. (On H.R. 2348)

(2) Hemp and Marihuana, 1945, pg. 31

(3) Hemp and Marihuana, 1945, pg. 4

(4) Hemp and Marihuana, 1945, pg. 5

(5) Hemp and Marihuana, 1945, pg. 5

(6) (Hemp and Marihuana, 1945, pg. 8)

(7) Hemp and Marihuana, 1945, pg. 9

(8) Hemp and Marihuana, 1945, pg. 11

(9) Hemp and Marihuana, 1945, pg. 18

(10) Hemp and Marihuana, 1945, pg. 18

(11) Hemp and Marihuana, 1945, pg. 18

(12) Hemp and Marihuana, 1945, pg. 19

(13) See 91 Cong. Rec. 7912–7916 , July 21, 1945

(14) See 91 Cong. Rec. 7912–7916 , July 21, 1945