Section 280E and the Cannabis Industry

摘要

Section 280E of the Internal Revenue Code was upheld by the United States Tax Court, in Northern California Small Business Assistants Inc. v. Commissioner. Section 280E denies all trade or business deductions and credits for trafficking in controlled substances. Despite legalization in several states, under federal law marijuana remains a Schedule I controlled substance. The United States Tax Court held that Section 280E is not a penalty provision and thus does not violate the Eighth Amendment, that the restriction of Section 280E is not limited only to the business expenses deductible under Section 162, and that Section 280E is not limited to only illegal marijuana activities despite the use of the word "trafficking" in Section 280E. In a blow to the American cannabis industry, the United States Tax Court, in Northern California Small Business Assistants Inc. v. Commissioner,1 held in October 2019 that Section 280E of the Internal Revenue Code did not violate the Eighth Amendment to the United States Constitution.