The IRS Can Still Investigate State-Legal Marijuana Businesses, Says DOJ

Even as more and more U.S. states legalize adult use marijuana, and the Safe Banking Act awaits potential Senate passage –having passed the U.S. House – the Department of Justice is still adamant that state-legalized marijuana businesses remain the target of federal disapproval.
Written by 
Medical Team, Leafreport's Clinician Team.
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Marijuana Business Daily reported this week that a day earlier, Solicitor General Elizabeth Prelogar had filed a brief before the U.S. Supreme Court seeking a ruling on the 280E tax issue that’s roiled the marijuana industry and prompted multiple lawsuits.

The IRS tax code Section 280E, explains Cornell University’s Legal Institute, states that no tax deduction or credit is allowed for any amount claimed by a business “trafficking in controlled substances,” in this case the Schedule I categorized marijuana. In other words, IRS investigations of these businesses may continue.

Previously, the Ninth Circuit Court of Appeals upheld a lower court’s ruling that such investigations may go forward. The defendants involved in that and the current DOJ brief are several cannabis companies led by Eric Speidell of Colorado-based The Green Solution. As MJBiz Daily reported, an earlier petition was filed before the U.S. Supreme Court by Standing Akimbo, based in Denver, to halt the IRS from obtaining its business records from state regulators.

The Court of Appeals, Prelogar wrote in her brief, had “merely explained, correctly, that the federal prohibition on trafficking marijuana is itself a sufficient basis for the IRS to investigate potential violations of Section 280E by petitioners, irrespective of state law.” Prelogar, the fourth-highest-ranking official in the DOJ, pointed out that multiple Colorado marijuana companies’ legal actions against 280E enforcement had all failed.

James Thorburn, an attorney for Green Solution and Standing Akimbo, MJBiz Daily reported, has expressed disappointment in the past that the Biden administration hasn’t changed from the previous administration’s stances on marijuana.


Medical Team
Medical Team
Leafreport's Clinician Team
The clinicians in our team bring their experience from across the spectrum of medical specialties, as well as their perspective from years of clinical practice, research, and patient advocacy. Medical Review, provided by members of Leafreport’s team, ensures that our content is accurate, current, and patient-focused.

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