Congressional Research Service has recently released an analysis that suggests cannabis businesses don’t need to wait to challenge the now-notorious 280E taxes. They may have the right to do so without waiting for a rescheduling.
CRS’s report (R46709) published by Milan N. Ball on the 6th of February provides a comprehensive legal analysis for Internal Revenue Code Section 280E. The provision that is the subject of much debate in the US regarding cannabis businesses rescheduling.
According to Section 280E, businesses who traffick in Schedule I and Schedule II controlled substances are denied tax credits or deductions. That means that state-legal cannabis companies cannot deduct anything from their taxes, including rent, utilities (including payroll), advertising, depreciation of assets, charitable contributions, etc.
Only one relief exists: the option to reduce gross receipts using the cost of goods. The CRS notes that this is mainly to prevent constitutional challenges under the Sixteenth Amendment. Beyond that, the report states, ‘there is little tax guidance concerning the application of Section 280E.’
CRS says that this provision will apply regardless of the state’s law. The CRS states that “no enforcement of the CSA renders Section 280E unoperable.”
The report concluded that it is still unclear whether the treatment in question violates the Eighth Amendment Excessive Fines Clause.
The following are some of the ways to get in touch with us Northern California Small Business Assistants Inc. In 2019, a Tax Court split in three. 10 judges found that the 280E is not a fine under the Eighth Amendment. Two judges declined to make a ruling on the issue of whether 280E constituted a fine, but agreed to deny the taxpayer’s request because he failed to show that it was excessive. Three determined that 280E imposes a fine but didn’t determine whether the fine was excessive.
The CRS characterised the constitutional status as ‘a matter of debate’, noting the Supreme Court’s standard that a fine is excessive where it is ‘grossly disproportional to the gravity of the offence.’
At the appellate stage, the question whether the taxing of cannabis businesses as a punitive measure for an offense that the federal government has overwhelmingly declined to prosecute is within this threshold was not tested.
A 2020 Treasury Inspector General audit, cited in the report, found high rates of noncompliance with 280E among cannabis businesses in California, Oregon, and Washington, and noted that ‘there is no easy method to identify marijuana businesses based on tax return filing information.’
The problem may be solved by rescheduling, but it is not always the best solution
The CRS’s report contains a survey of proposed legislation that could maintain 280E for cannabis companies even after rescheduling. S.471 and H.R. Section 280E of the Internal Revenue Code would be amended to explicitly prohibit deductions for cannabis businesses, regardless their scheduling.
The US tax reduction that US operators had been counting on would not be achieved if either bill passes.
Report also highlights that the problem of banking access cannot be solved by rescheduling. It cites testimony from a former Treasury Secretary describing cannabis businesses’ exclusion from the financial system as ‘a very large concern,’ noting the IRS has had to ‘build cash rooms to take in large amounts of cash’ to collect taxes from unbanked operators.
The following are some of the ways to get in touch with us. MEDCAN24 As reported by the CRS last week, the administration pathway to rescheduling is still highly insecure. But the CRS report asks whether relief for the 280E will be provided even if the schedule was finally changed.
FDA confirms Medical Utility
FDA Commissioner Marty Makary publicly acknowledged the medical utility of cannabis, adding regulatory weight to the issue given that its current Schedule I classification is predicated on a substance having ‘no currently accepted medical use.’
The commissioner made the comments during an interview with Fox Business this week. He was asked to comment on recent events. New York Times coverage calling for more ‘guardrails on cannabis’.
He argued for its medicinal value, even though he focused most of his response on arguments that have been well trodden in the public health arena, such as the potency increase of modern cannabis and links between adolescent marijuana use and psychosis.
The Trump Administration is also very serious in making sure the medicinal uses, that is the indications that people can find benefits in conditions such as chronic terminal cancers, are advanced. So we have taken action to move the scheduling from Schedule 1 to Schedule III.
HHS’s recommendation to begin the process of rescheduling in August 2023 was based on the FDA’s evaluation. HHS refused to give evidence in December at the DEA rescheduling meetings, prompting the agency’s subpoenas for four FDA officials to testify. Makary has now confirmed the FDA’s own analysis of the medical benefits.
Recent analysis by the Congressional Research Service suggests that cannabis businesses do not have to wait until rescheduling before challenging the infamous 280E tax burden. It may even be constitutional.
CRS’s report (R46709) published by Milan N. Ball on 6th February, is a comprehensive legal analysis of Internal Revenue Code Section 280E. It is the section at the center of the rescheduling controversy for US cannabis companies.
The section 280E of the tax code denies deductions or credits for any businesses that traffic in Schedule I or Schedule II substances. This means state-legal marijuana operators are not allowed to deduct their rent, utilities or payroll. They also cannot claim advertising expenses, depreciation or charitable donations.
Only one relief option is available: the offset of gross receipts against cost-of-goods sold. The CRS points out that this narrow exception exists to prevent constitutional challenges under the Sixteenth Amendment. Beyond that, the report states, ‘there is little tax guidance concerning the application of Section 280E.’
CRS: The CRS says that the provision is applicable regardless of state laws. “Sections 280E apply to marijuana businesses which operate in accordance with state law, because marijuana trafficking continues to be a violation of federal law,” it states. “Any failure to enforce the CSA doesn’t render Section 280E unoperable.”
The report concluded that it is still unclear whether the treatment in question violates the Eighth Amendment Excessive Fines Clause.
The following are some of the ways to get in touch with us Northern California Small Business Assistants Inc. In 2019, a Tax Court split in three. 10 judges found that the 280E is not a fine under the Eighth Amendment. The two judges who refused to decide whether it was a penalty agreed to deny the taxpayer’s request because the taxpayer failed to prove that the fine was excessive. Three determined that 280E imposes a fine but didn’t determine whether the fine was excessive.
The CRS characterised the constitutional status as ‘a matter of debate’, noting the Supreme Court’s standard that a fine is excessive where it is ‘grossly disproportional to the gravity of the offence.’
At the appellate stage, the question whether the taxation of cannabis businesses as a punitive measure for an offense that the federal government has overwhelmingly declined to prosecute is within this threshold was not tested.
A 2020 Treasury Inspector General audit, cited in the report, found high rates of noncompliance with 280E among cannabis businesses in California, Oregon, and Washington, and noted that ‘there is no easy method to identify marijuana businesses based on tax return filing information.’
The problem may be solved by rescheduling, but it is not always the best solution
CRS has a report that is largely under-reported. Its survey examines legislative proposals to maintain 280E’s application for cannabis businesses, even after rescheduling. S.471 and H.R. Section 280E of the Internal Revenue Code would be amended to explicitly prohibit deductions for cannabis businesses, regardless of their scheduling.
Reclassifying to Schedule III, should either of the bills advance, would not provide tax relief for US operators.
Report also highlights that the problem of banking access cannot be solved by rescheduling. It cites testimony from a former Treasury Secretary describing cannabis businesses’ exclusion from the financial system as ‘a very large concern,’ noting the IRS has had to ‘build cash rooms to take in large amounts of cash’ to collect taxes from unbanked operators.
The following are some of the ways to get in touch with us. MEDCAN24 As reported by the CRS last week, the administration pathway to rescheduling remains highly uncertain. But the CRS raises questions about whether or not 280E relief will occur even if the schedule is finally changed.
FDA confirms Medical Utility
FDA Commissioner Marty Makary publicly acknowledged the medical utility of cannabis, adding regulatory weight to the issue given that its current Schedule I classification is predicated on a substance having ‘no currently accepted medical use.’
The commissioner made the comments during a Fox Business Interview this week when asked about recent developments. New York Times coverage calling for more ‘guardrails on cannabis’.
He argued for its medicinal value, even though he focused most of his response on arguments that have been well trodden in the public health arena, such as the potency increase of modern cannabis and links between adolescent marijuana use and psychosis.
The Trump Administration is also very serious in making sure the medicinal uses, that is the indications that people can find benefits in conditions such as chronic terminal cancer, are advanced. So we have taken action to move the scheduling from Schedule 1 to Schedule III.
HHS’s recommendation to begin the process of rescheduling in August 2023 was based on the FDA’s evaluation. HHS refused to give evidence in December at DEA’s rescheduling meetings, and the agency sought subpoenas from the FDA to compel their testimony. Makary has now confirmed the FDA’s own analysis of the medical benefits.
Cannabis Law Resources in Poland
Discover essential legal information about the cultivation of cannabis, its sale, and regulations governing medical products in Poland. You can use these resources to learn about the requirements for certifications, permissions and compliance.
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Polish News Registration and Interests of Cannabis Businesses
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Permissions for Cannabis Sales in Poland
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Authorization for Importing or Manufacturing Medical Products
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Permission for Manufacturing or Importing Medical Products
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Certificate of Good Manufacturing Practices (GMP)
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Registration of Medical Products in Poland