Today is ‘tax day’ in the United States. Well, it was at the beginning of the day until the IRS’ online payment service malfunctioned. Now tomorrow is ‘tax day.’ Regardless, today is as good a day as any to bring awareness to one of the biggest issues facing the cannabis industry today – Section 280E of the IRS tax code.
Per Cornell Law School 280E stipulates that ‘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.’
Because cannabis businesses cannot deduct things that businesses in other industries can, cannabis entrepreneurs are at a tremendous disadvantage. As legendary cannabis entrepreneur Steve DeAngelo once explained to me at an SSDP conference, 280E reform is hard to achieve because to most Americans tax code reform is a very boring issue, and opponents know it.
When cannabis businesses get raided, there are guns being put in people’s faces while news cameras roll and that usually (hopefully) results in a huge outcry from the public. But it’s extremely rare for the media to cover entities in the cannabis industry that are subjected to 280E regulations. For some that are not in the cannabis industry, 280E is not a sexy issue so they don’t pay much attention to it.
But 280E reform is vital to everyone. It’s vital to entrepreneurs for obvious reasons, but it’s also vital to consumers who are paying more for cannabis than they otherwise would whether they know it or not. It’s vital for non-consumers that are still cannabis advocates because money that is currently going to Uncle Sam could be going to reform efforts. It’s also vital for non-advocates because a successful cannabis industry will benefit all Americans at the state level via the economic boost that it brings, the jobs it creates, and the taxes it generates.
Yes, 280E results in more taxes going into federal coffers, but I would argue that if that money was re-invested into cannabis businesses they would thrive, thereby growing the industry even larger and more rapidly, which would have an end result of more taxes being raised at the federal level, and a lot more at the state level. At least that’s my opinion. Obviously, the industry is not legal in all states, but I am confident that it will be, and so if 280E is not affecting a state yet, it will be eventually.
The National Cannabis Industry Association has put out a STELLAR video that really sums up the 280E issue. Please share it far and wide! The video can be found below: