“Cannabis companies should consider various pitfalls to ensure not only legal compliance, but to maximize potential benefits.”
By Meeren Amin, William Bogot and Douglas W. Charnas, Fox Rothschild LLP
With rescheduling of medicinal marijuana and potential relief coming for recreational use, cannabis companies should be aware of tax benefits available to the industry.
One such incentive for companies not subject to Internal Revenue Code (IRC) § 280E—which blocks tax benefits to entities that sell Schedule I and II substances—is the IRC § 41 R&D (research and development) tax credit. The R&D tax credit provides a dollar-for-dollar reduction of tax owed for qualifying companies. It is not industry specific and can be claimed by a qualifying company in any sector, including cannabis.
The R&D tax credit was enacted in 1981 to incentivize U.S. companies to increase R&D activity. For years the credit was extended temporarily by Congress at the end of each calendar year. However, in 2015, Congress made it permanent. And then in 2025, lawmakers breathed even more life into the credit by eliminating the requirement that R&D expenditures be amortized over a five-year period.
Now, with IRC § 280E on the chopping block as cannabis moves toward Schedule III
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