The Biden DOJ took the side of the IRS in the marijuana 280E tax arguement that state-legal cannabis businesses CAN be investigated by the IRS for probable violations of Section 280E of the tax code.
It is believed to be one of the first times the U.S. Department of Justice under the new administration has filed an opinion in a marijuana court case.
The Feb 2021 release of the filing was made by DOJ attorneys, led by acting Solicitor General Elizabeth Prelogar.
“That is precisely the federal government’s position and has been for many years,” Thorburn said – an attorney representing a medical marijuana dispensary. “We were hoping that the Biden administration would soften that stance. “It, unfortunately, has not and is doubling down.”
Section 280E of the IRS tax code prohibits marijuana businesses from taking traditional business deductions because the plant is listed as a Schedule 1 drug under the federal Controlled Substances Act.
Industry leaders are optimistic that federal marijuana law reform could come in the next two years because of the Democratic – control of the U.S. House, U.S. Senate and presidency.
QUESTION PRESENTED
For income tax purposes, the Internal Revenue Code disallows any deduction or credit for business expenses incurred in carrying on a trade or business that “consists of trafficking in controlled substances” in violation of federal or state law. 26 U.S.C. 280E. Marijuana is a controlled substance, and federal law prohibits trafficking it. 21 U.S.C. 812(c), 841(a)(1). Petitioners own and operate a marijuana dispensary in Colorado, which has decriminalized marijuana in some respects under state law. The question presented is as follows:
Whether the court of appeals correctly affirmed the district court’s decision to enforce several third-party summonses issued by the Internal Revenue Service to a Colorado state agency as part of an investigation into the accuracy of petitioners’ federal income tax returns, including whether petitioners claimed any business expense deductions disallowed by Section 280E.
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