Forbes.com: “Members of Congress on Thursday tried to throw the cannabis industry a legislative lifeline on taxes. The Small Business Tax Equity Act of 2017, introduced in the House by Rep. Carlos Curbelo (R-FL) and Rep. Earl Blumenauer (D-OR) and in the Senate by Sen. Ron Wyden (D-OR), Sen. Rand Paul (R-KY), and Sen. Michael Bennet (D-CO) today, would allow state-legal cannabis businesses to take normal business deductions like any other legal business. Known as 280E, the tax code provision prevents cannabis businesses from taking normal business deductions related to sales.
Craig W. Smalley, who has a Masters in Taxation, wrote a three part article on how Internal Revenue Code Section 280E affects the federal income taxation of businesses that grow or sell marijuana. The first article starts with:
“Following the 2016 elections, marijuana is now legal in some capacity in 28 states. However, even though it’s legal in certain states, the federal government considers the drug an illegal Schedule I narcotic. Resultingly, business owners in the marijuana industry have hit a wall with IRC §280E, which states:
‘No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted’.”