The Good, the Bad, and the Ugly: Why IRC § 280E Is Not the Industry Killer It Is Portrayed to Be

Ohio State Public Law Working Paper Series, No. 496

Drug Enforcement and Policy Center, No. 11, September 2019

16 Pages Posted: 25 Aug 2019

See all articles by Patrick Cleary

Patrick Cleary

Ohio State University (OSU), Michael E. Moritz College of Law, Students

Date Written: August 20, 2019

Abstract

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

Suggested Citation

Cleary, Patrick, The Good, the Bad, and the Ugly: Why IRC § 280E Is Not the Industry Killer It Is Portrayed to Be (August 20, 2019). Drug Enforcement and Policy Center, No. 11, September 2019. Available at SSRN: https://ssrn.com/abstract=3440110 or http://dx.doi.org/10.2139/ssrn.3440110

Patrick Cleary (Contact Author)

Ohio State University (OSU), Michael E. Moritz College of Law, Students ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

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