While marijuana may soon be rescheduled under federal law, that doesn’t currently exempt state-legal cannabis businesses from an Internal Revenue Service (IRS) code known as 280E that bars them from taking federal tax deductions, the agency argues in a new filing with the U.S. Tax Court.
In response to a petition to the court filed by the New Mexico marijuana business Ultra Health—which challenged the conventional interpretation of the IRS code, which applies to tax deduction claims connected to the sale of Schedule I and Schedule II drugs under the Controlled Substances Act (CSA)—IRS said the issue has already been soundly settled by Congress and various federal courts.
Those courts “have consistently held that section 280E is constitutionally valid and have created a robust legal authority supporting its validity and applicability to sellers of marijuana,” it said. “Federal courts have addressed the applicability of section 280E in over 40 published orders or opinions. No resulting order or opinion include a ruling or holding that section 280E is unconstitutional or inapplicable to cannabis sellers.”
Ultra Health’s novel argument in support of its alleged eligibility for tax deductions is based on the fact that 280E applies to businesses that sell controlled substances
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