The Good, the Bad, and the Ugly: Why IRC § 280E Is Not the Industry Killer It Is Portrayed to Be
Drug Enforcement and Policy Center, No. 11, September 2019
16 Pages Posted: 25 Aug 2019
Date Written: August 20, 2019
Taxes implicate nearly every area of business. The recent marijuana boom has thrust one tax code provision into the spotlight. IRC § 280E prohibits tax deductions and credits for expenses paid or incurred in the trafficking of Schedule I or II controlled substances. This increases tax liability for marijuana businesses who commonly refer to the provision as an “industry killer.” This paper intentionally goes against the grain to show how IRC § 280E is not the “industry killer” it is portrayed to be and explores ways in which slow growth may be marijuana’s best path forward. The argument in favor of IRC § 280E is made by explaining the provisions’ development and legal framework before applying it to the marijuana industry. Next, IRC § 280E must be contextualized within the marijuana industry’s rapid growth and the 2017 Tax Cuts and Jobs Act. Lastly, the Oregon example is used to exemplify how IRC § 280E is helping the industry by providing a check on cash flow and preventing prices from being driven down further through saturation.
Keywords: 280E, Marijuana, Tax Cuts & Jobs Act, Taxes,Business, Cannabis Business Law
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