19 July 2016
This is the first installment of a three-part series that will delve into and explain the intricacies of Section 280E, so stay tuned throughout the week for Parts 2 and 3!
What is Section 280E?
Section 280E of the Internal Revenue Code (IRC) restricts businesses from taking deductions for ordinary business expenses if the business has earned income from trafficking Schedule I or Schedule II substances per the Controlled Substances Act (CSA). This section was originally added to the IRC in 1982. However, it has now also been applied to cannabis businesses that operate legally under state law because cannabis is still listed as a Schedule I substance under the CSA.
Section 280E was created by Congress after a 1981 court case in which a convicted cocaine trafficker was disallowed from claiming deductions for ordinary business expenses under federal tax law. However, Section 280E is still being applied to legal cannabis businesses in these states despite the fact the law was mostly intended to target illegal drug dealers.
Full article at