The Current State of 280E and Recent Legal Action
The impact of tax code Section 280E removes a marijuana-related business’s ability to claim tax breaks as normal commercial, medical, or agricultural businesses. Effectively, 280E forbids businesses from deducting business expenses, other than the cost of goods sold, from income if the taxpayer’s trade or business is associated with the trafficking of Schedule I or II substances, as defined by the Controlled Substances Act.
The Standing Akimbo LLC v. United States case in the Supreme Court was one of the most notable recent legal actions taken against 280E. Supreme Court Justice Clarence Thomas rendered an opinion that clarified the government’s position. Several weeks after this decision, then acting Solicitor General Elizabeth Prelogar stated clearly in a brief commenting on Speidell v. United States, that lower courts have been correct in ruling that state-legal marijuana businesses can be investigated by the Internal Revenue Service for potential violations of Section 280E.
In terms of the cannabis industry, there are no exceptions when it comes to Section 280E. There have been multiple cases over the last 12 months, even at the Supreme Court level, and in each instance, the Departments of Justice’s and Treasury’s position has been clarified that as long as a business involves a Schedule I substance, nothing will change in the tax laws.
The Path Forward
We have the MORE Act, the SAFE Banking Act, and nearly 47 states working on some form of legalization, with seven new markets opening just within the last nine months. Although the current administration isn’t making cannabis legalization a priority, they have confirmed that they won’t allocate any Department of Justice resources to marijuana enforcement action in a state where it is legal. Unless, of course, it involves anti-money laundering or Bank Secrecy Act (BSA) issues inside the industry. [Read More @ Bloomberg Tax]
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