Paul L. Caron

Thursday, August 29, 2019

I.R.C. § 280E Is Not The Industry Killer It Is Portrayed To Be

Patrick Cleary (J.D. 2020, Ohio State), The Good, the Bad, and the Ugly: Why IRC § 280E Is Not the Industry Killer It Is Portrayed to Be:

Taxes implicate nearly every area of business. The recent marijuana boom has thrust one tax code provision into the spotlight. IRC § 280E prohibits tax deductions and credits for expenses paid or incurred in the trafficking of Schedule I or II controlled substances. This increases tax liability for marijuana businesses who commonly refer to the provision as an “industry killer.” This paper intentionally goes against the grain to show how IRC § 280E is not the “industry killer” it is portrayed to be and explores ways in which slow growth may be marijuana’s best path forward. The argument in favor of IRC § 280E is made by explaining the provisions’ development and legal framework before applying it to the marijuana industry. Next, IRC § 280E must be contextualized within the marijuana industry’s rapid growth and the 2017 Tax Cuts and Jobs Act.

Lastly, the Oregon example is used to exemplify how IRC § 280E is helping the industry by providing a check on cash flow and preventing prices from being driven down further through saturation.

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