Article: Chris Nani – Part II: My Proposed Tax Break

Authored By:

“Chris Nani, law student at Ohio State University, graduating in 2019. He currently is looking to break into the field of cannabis law through blogging and meeting new attorneys. If you’d like to contact Chris about his article or have any comments for him you can reach him at”

Recognizing that federal legalization is a daunting challenge, I studied alcohol prohibition through the PBS series Prohibition. Prohibition didn’t start immediately but was the consequence of decades of alcoholism and the violence it spurned. Women were tantamount in starting a movement of prohibition against alcohol and it took years and milestones to reach the creation of the Eighteenth Amendment.

It initially started with women’s meetings, then protesting saloons, and eventually men joining the movement and swearing off alcohol. The women’s suffrage movement helped pave the way to prohibition through time and dedication.

The same is true for the Twenty-First Amendment ending prohibition. Both movements took years of lobbying, politics, and gaining public support. Learning from the past, I propose, instead of attempting to completely legalize marijuana, to create tax incentives for marijuana businesses while enforcing § 280E.

While there is still federal prohibition, Congress should incentivize current marijuana businesses to perform desirable social policy goals in exchange for tax deductions. Because taxes are so astronomically high for marijuana businesses such as dispensaries, by adding an amendment to § 280E Congress could specifically tailor it to marijuana businesses or include all scheduled I and II drugs. I elected to make it about all scheduled I and II drugs.

Under § 280E, the proposed amendment would read:

“Any scheduled I or II drug business that pays federal income taxes, regardless of its legality, is applicable to deduct from its expenses any activities that meet the following: (i) educational programs that demonstrate health risks and safety procedures for the drug(s) the business is involved with (ii) informational programs that display the short and long-term risks of the drug(s) the business is involved with and (iii) informational programs that educate on how to identify the signs of an overdose and how to properly treat it for the drug(s) the business is involved with.”


Just like any statute, my proposed § 280E amendment is vulnerable to abuse, but hopefully the legislative history would be able to give guidance to the IRS and courts if litigation arose. The social goal aimed at this amendment is public health. By increasing awareness and knowledge of a drug, the user will be able to make better judgment calls and more accurately understand the consequences of their actions.


Now, to fully dissect the language of my proposed amendment. The first sentence applies to any scheduled I or II drug regardless of its legality. This includes drugs such as heroin, LSD, and marijuana along with prescribed drugs such as Adderall, Fentanyl, and OxyContin.1 All of the drugs listed have side effects and can damage the human body. By educating the public on the health risks and safety procedures for the drug, heroin dealers and marijuana dispensaries both could reduce their federal income taxes. I believe it’s better for a heroin addict to understand the deadliness of the drug and how to properly use it beforehand to help minimize the chance of death. Similarly, for marijuana, dispensaries could receive a deduction while showing consumers how to properly use a bong or smoke a blunt while discussing the health consequences of smoking. It would allow dispensaries to showcase their products and demonstrate any new innovative ways to use marijuana while additionally educating the public on how to properly use a device.


Smoking any substance can release carcinogens. Although marijuana has many benefits, smoking it has been associated with lung cancer.2 There are stigmas both good and bad about marijuana. To normalize how people view marijuana, by labelling a package of marijuana with a surgeon’s warning similar to tobacco or alcohol consumers would have knowledge of the potential consequences of marijuana. Secondly, the public generally does not know how to safely handle marijuana products. Incentivizing a dispensary to teach its consumers how to properly handle hash oil (a derivative of marijuana), could reduce accidental fires and injuries.3 Hash oils produce vapors that are combustible. Without proper ventilation the vapors can become trapped in a room and easily combust causing explosions. Granted, these happen infrequently, encouraging dispensaries to advise their consumers about the nature of hash oil would further public safety. Because marijuana can be consumed in many ways, it is in the public interest to educate consumers to prevent injury or death.


The second requirement would allow dispensaries to talk about their products and potentially reduce labor costs while disclaiming the consequences of prolonged smoking. The requirement is meant to broadly apply the risks of a drug so representatives of Fentanyl would be incentivized to discuss the dangers of its highly addictive properties and deduct their labor costs. Because marijuana has not been fully researched yet, it would be a little harder for dispensaries to meet this requirement, but they would still be able to talk about the health effects of long term smoking or the harm it causes to teens who smoke. Although neither seems advantageous to a dispensary, the dispensary could use pamphlets or have a sign advertising its product with a disclaimer on the bottom to meet the criteria. Similar to every tobacco or liquor product and how they are required to have warnings on them describing their dangers, marijuana businesses would be incentivized to fully inform the public of their product while receiving a much needed deduction to their taxes. Marijuana businesses could theoretically go to marketplaces and advertise their products with signs and still receive deductions because of the disclaimer.


I wrote the second requirement for consumer protection reasons. Dispensaries could accomplish this along with the first requirement by putting warnings on their products or handing out pamphlets with each person. The requirement doesn’t require a business to actively educate or inform consumers on a product. The language is written to give latitude to the businesses to decide how they best see fit to comply with the amendment. By informing the public the consequences of consuming marijuana in its various forms, consumers will make more informed decisions.


The last provision is meant to save lives and although marijuana can’t kill you; people have gone to emergency rooms because of overconsumption. By educating users on how to identify an overdose and what to do, the goal would be it would reduce deaths and hospital visits. If an individual could identify when their friend is starting to overdose on marijuana, instead of taking them to the emergency room and wasting their limited resources; the individual could help calm them down and treat them. I understand not all drugs are that easy, for an Adderall overdose, emergency hospital visits may be necessary. If an individual can spot the symptoms however, it would reduce the time between the overdose and treatment helping the victim and potentially saving their life.


For marijuana specifically, many first time users become startled and can feel dizzy or nauseous the first time they use marijuana. At a dispensary, an employee could ask the consumer during their purchase their experience level with marijuana. An employee could then either explain or refresh to the consumer the effects of marijuana and recommend an amount for them to consume at once. Not only would this help reduce overdosing, but it would make the experience more personable and dispensaries could spin it off as their employees making personal connections with all of their consumers. Additionally, the employee could mention in the event of an overdose what to do and when it would be necessary to call emergency services.


The key provision to my amendment is that the business must pay federal income taxes to receive the deduction. Because drug dealers don’t report their drug sales, they would not be applicable for the tax deductions. But for marijuana businesses and any future drugs that are scheduled as a I or II, they would be applicable regardless of their legality as long as they reported their income. Additionally, pharmaceutical companies are already required to print the health hazards and dangers of their drugs so it would appease them as well. Overall, the pharmaceutical lobby would probably support the amendment because it would benefit everyone. It would allow businesses to decide on an individual basis if they would be willing to comply with all three requirements that would allow them to deduct part of their labor expenses or they could decide the public knowledge of their drug would be detrimental and not restructure themselves to receive the deduction.


The goal of the amendment is to appease the pharmaceutical industry, congress, and garner public support. By making the amendment inclusive of all heavily regulated drugs, it includes various major players. For marijuana businesses, it could save them a couple of thousand dollars annually because they could rewrite job descriptions to include the requirements and implement the requirements into their product packaging. For the pharmaceutical industry, it would be an easy deduction for them because they’re already mostly complying with the requirements due to 21 CFR 201.56. The only additional information they would be required to have is how to identify the symptoms of an overdose. Lastly, congressmen would bandwagon onto the amendment because of its appeal. The amendment isn’t political and calls for greater consumer protection. It has bipartisan appeal because it allows all businesses within the provision to receive a deduction as long as they’re open and disclose information about their drug that a consumer needs to know to make a fully informed decision.

1Drug Enforcement Agency, Drug Scheduling,

2 Reena Mehra, The Association Between Marijuana Smoking and Lung Cancer. A Systematic Review. Arch Intern Med. 2006. 1359-1367.

3Jack Healy, Odd Byproduct of Legal Marijuana: Homes That Blow up, The New York Times (Jan. 17 2015),

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