National Law Review Article: Tax Woes of the Cannabis Plant

Well worth a read . here’s how they introduce the piece..

With the emergence of state-sanctioned marijuana businesses over the last 10 years, the application of § 280E has left many marijuana businesses with tax liabilities that do not accurately reflect the income, or “gain in wealth realized”, they are generating. Recently, a marijuana business, Harborside Health Center, which was hit with an $11 million tax liability by the U.S Tax Court, has challenged the constitutionality of § 280E, arguing that it violates the 16th Amendment’s reliance on “income”. Patients Mut. Assistance Collective Corp. v. Commissioner, Nos. 29212-11, 30851-12, 14776-14, 2018 Tax Ct. Memo LEXIS 211 (T.C. Dec. 20, 2018). The business maintains that § 280E improperly categorizes all monies generated by the business as income rather than more appropriately distinguishing those monies from “gain in wealth realized”. Harborside Health Center’s appeal will be heard in the Ninth Circuit, but remains unscheduled to this point. Patients Mut. Assistance Collective Corp. v. Commissioner, 19-73078. Per the brief that has been submitted by the appellant, the premise of their argument is that, “[b]y blocking a marijuana business from taking any deductions related to their expenses, § 280E is improperly classifying all money that passes through the business as income”. The National Cannabis Industry Association and the Marijuana Industry Group have filed amicus briefs echoing the appellant’s 16th Amendment challenge to § 280E.

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