As a federal marijuana rescheduling decision remains pending, congressional researchers have released an analysis of tax implications for cannabis businesses under current law—including a review of the idea that depriving the industry of the ability to take federal tax deductions amounts to a constitutional violation.
In a report published on Friday, the Congressional Research Service (CRS) said the Schedule I status of marijuana under the Controlled Substances Act (CSA) “means that marijuana businesses are treated differently from many other businesses for tax purposes.” One key example concerns the application of an Internal Revenue Service (IRS) code known as 280E, which “disallows taxpayers from taking tax deductions and claiming tax credits attributable to marijuana businesses.”
Despite attempts to contest 280E, the cannabis industry has “generally been unsuccessful” in pleading their case in court and “likewise have not succeeded in their attempts to challenge Section 280E on constitutional grounds.”
CRS pointed to a case, Northern California Small Business Assistants, Inc. v. Commissioner, in which a marijuana business challenged a notice of deficiency from IRS that explained how 280E “disallowed the taxpayer’s deductions.”
“The taxpayer filed a claim disputing the notice, and moved for partial summary judgment challenging the application of Section 280E,” the
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