The Marijuana Industry Paid an Extra $1.8 Billion in Federal Taxes Because of the 280E Tax Code

The Marijuana Industry Paid an Extra $1.8 Billion in Federal Taxes Because of the 280E Tax Code

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Why legalize cannabis when 280E is the gift that keeps on giving to the Federal government?

Whitney Economics, a cannabis research firm, recently conducted a comprehensive analysis of the impact of federal taxes on the cannabis industry. The findings revealed that in 2022, cannabis operators incurred an astonishing $1.8 billion in additional taxes compared to conventional businesses. Looking ahead, it is projected that this excess burden will rise even further to reach $2.1 billion in 2023.

The Reason Behind The Higher Tax Burden for Cannabis Operators

Despite the growing number of states that have legalized medicinal or adult-use cannabis operations, cannabis’ classification as a Schedule I controlled substance under the Controlled Substances Act (CSA) remains unchanged.

Under this classification, cannabis businesses that operate per state law are deemed criminal enterprises engaged in the trafficking of a controlled substance under federal law. This label treats law-abiding business owners and operators as drug dealers peddling substances as harmful as cocaine and heroin. As such, these businesses are subjected to Section 280E.

Section 280E is a provision that punishes those involved in the trafficking of Schedule I or II drugs by prohibiting the deduction of “ordinary and necessary” business expenses. This includes below-the-line deductions, even after reducing gross receipts by the cost of goods sold (COGS). This results in federal income tax liability being calculated based on gross income rather than net income.

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Federal Court Strikes Down Gun Ban For People Who Use Marijuana

Federal Court Strikes Down Gun Ban For People Who Use Marijuana

The federal government’s justification for upholding the law is “concerning,” according to a federal judge, who ruled that the ban on marijuana users owning firearms is unconstitutional.

A man was charged in Oklahoma in 2022 after police found marijuana and a handgun in his car while he was driving, and the U.S. District Court for the Western District of Oklahoma dismissed the indictment on Friday.

 Judge Patrick Wyrick concurred with the attorneys that the Second Amendment of the Constitution is violated by the law that forbids “unlawful” cannabis users from owning firearms.

This ruling comes as the ban is still being contested in a separate federal court by several medical cannabis patients and former Florida Agriculture Commissioner Nikki Fried (D).

The Trump-appointed judge in this case heavily relied on an interpretation of a recent Supreme Court decision in which the justices generally set higher standards for policies that seek to restrict gun rights.

According to the ruling, any such limitations must be in line with the Second Amendment’s original ratification in 1791.

The judge said in his decision on Friday that the historical analogies the Justice Department relied on to support the ban, including allusions to outdated case law prohibiting Catholics, allies, slaves and Indians from owning weapons, “misses the mark” and “cannot provide the basis for a historical analogue.”

The government’s position that marijuana users who use it illegally are “both unvirtuous and dangerous” was also addressed. A user of marijuana does not automatically fall into that category, according to Wyrick, “because the mere act of using marijuana do not involve violent, forceful, or threatening conduct.”

Similar arguments have been made by the government in the Florida-based case, in which medical cannabis patients are actively contesting a federal district court’s decision that dismissed their DOJ lawsuit in November.

Because the state’s cannabis laws had made it possible for “habitual marijuana users” and other disqualified people to obtain firearms illegally, the ATF issued an advisory in 2020 that specifically targeted Michigan and mandated that gun sellers conduct federal background checks on all unlicensed gun buyers.

The Department of Justice will likely appeal Wyrick’s ruling to a higher federal court.

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US court upholds ban on selling guns to marijuana card holders

US court upholds ban on selling guns to marijuana card holders

SAN FRANCISCO — A federal ban on the sale of guns to medical marijuana card holders does not violate the Second Amendment, a federal appeals court said Wednesday.

The ruling by the 9th U.S. Circuit Court of Appeals applies to the nine Western states that fall under the court’s jurisdiction, including California, Washington and Oregon.

It came in a lawsuit filed by S. Rowan Wilson, a Nevada woman who said she tried to buy a firearm for self-defense in 2011 after obtaining a medical marijuana card. The gun store refused, citing the federal rule banning the sale of firearms to illegal drug users.

Marijuana remains illegal under federal law.

Wilson said she was not a marijuana user, but obtained the card in part as an expression of support for marijuana legalization.

She challenged guidance issued by the federal Bureau of Alcohol, Tobacco, Firearms and Explosives in 2011 that said gun sellers should assume people with medical marijuana cards use the drug and not sell them firearms.

It’s illegal for a licensed firearm dealer to sell a gun to an Oregon medical or recreational marijuana consumer, said Portland lawyer Leland Berger. He noted that the ruling is focused on sales and doesn’t affect medical marijuana consumers who already have guns.

The 9th Circuit in its 3-0 decision said it was reasonable for federal regulators to assume a medical marijuana card holder was more likely to use the drug.

The court also said Congress had reasonably concluded that marijuana and other drug use “raises the risk of irrational or unpredictable behavior with which gun use should not be associated.”

“The notion that cannabis consumers are violent people is absurd,” Berger said, calling the notion that classifying medical card holders who use marijuana to treat debilitating medical conditions as violent people is “even more absurd.”

Paul Armentano, deputy director of NORML, a nonprofit that works to reform marijuana laws, called on Congress to “amend cannabis’ criminal status in a way that comports with both public and scientific opinion, as well as its rapidly changing legal status under state laws.”

“Responsible adults who use cannabis in a manner that is compliant with the laws of their states ought to receive the same legal rights and protections as do other citizens,” he said in a statement published on the nonprofit’s website.

Wilson’s attorney, Chaz Rainey, said there needs to be more consistency in the application of the Second Amendment. He planned to appeal the decision and his options include submitting the appeal to the same panel of judges that issued the ruling, a larger panel of the circuit court or the U.S. Supreme Court.

“We live in a world where having a medical marijuana card is enough to say you don’t get a gun, but if you’re on the no fly list your constitutional right is still protected,” he said.

The 9th Circuit also rejected other constitutional challenges to the ban that were raised by Wilson, including her argument that her gun rights were being stripped without due process.

Armentano said the idea that marijuana users were more prone to violence is a fallacy.

“Responsible adults who use cannabis in a manner that is compliant with the laws of their states ought to receive the same legal rights and protections as other citizens,” he said.

Alex Kreit, a marijuana law expert at Thomas Jefferson School of Law in San Diego, said the ruling was significant — but may not be the last time the 9th Circuit addresses medical marijuana and gun rights.

“It seems like the court did not foreclose the possibility of a challenge by actual medical marijuana users that they shouldn’t be lumped with other drug users in terms of concerns about violence,” he said.

— The Associated Press

September 01, 2016