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ARTICLE · 03 FEBRUARY 2020

Section 280E – Why Are We Still Having This Discussion?

Seyfarth Shaw LLP
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If you are in the cannabis industry, you should already know Section 280E of the Internal Revenue Code. It consists of only one sentence:

United StatesCannabis & Hemp

If you are in the cannabis industry, you should already know Section 280E of the Internal Revenue Code. It consists of only one sentence:

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.

In simple terms, 280E denies a cannabis business the ability to deduct its business expenses in computing its Federal income tax liability. How this actually works and how can you plan around it are topics beyond the scope of this post, so I suggest you familiarize yourself before continuing. I'll wait..............

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