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
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
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