IRC Section 280E: An Unjust Burden on State-Legal Cannabis Businesses

Section 280E of the Internal Revenue Code forbids businesses from deducting otherwise ordinary business associated with the “trafficking” of Schedule I or II substances, as defined by the Controlled Substances Act.

This provision was enacted by Congress in 1982 in order to penalize illegal drug dealers.  However, today the IRS aggressively applies Section 280E to state-licensed cannabis businesses, entities that were never conceived of when the statute was originally adopted.

An overwhelming majority of U.S. states now permit some form of legal cannabis commerce despite its nonsensical Schedule I status under federal law. As a result of the outdated federal status, 280E is being applied to thousands of licensed businesses effectively prohibiting them from taking the ordinary business deductions every other business relies on. 

We updated our position paper, “IRC 280E: An Unjust Burden on State-Legal Cannabis Businesses,” to help illustrate the facts about this outdated provision of the tax code. We’ve already delivered this publication to every member of Congress but we encourage you to download it and share with those in your network who need to know about 280E. 

The publication includes data from NCIA’s chief economist Beau Whitney which shows that exempting state-legal cannabis businesses from 280E would create a net benefit to the economy of nearly $2 billion dollars over the next three years. That means more new jobs, more prosperity, and more payroll taxes for the federal government.

Risk Management and Insurance Manual: An Introduction to Cannabis Insurance

The National Cannabis Industry Association’s Risk Management & Insurance Committee is a multidisciplinary group of risk management professionals convened to draw on the expertise and experiences of professionals dedicated to the cannabis community.

This manual is the first in a series of insurance manuals that will help guide you through the various coverages and definitions used in the cannabis insurance industry. This first edition of the RMIC Insurance manual will outline the entry level knowledge base for the cannabis insurance industry. Future additions will dive deeper into more specific insurance topics.

The Medicine of Cannabis: An Overview for Medical Professionals and Policymakers

As cannabis use expands in the U.S., issues that require the guidance of scientists and clinicians are rapidly arising. Patients are looking to their medical providers for information on cannabis safety, potential for interactions with pharmaceuticals, and therapeutic applications. However, the existing legal environment significantly hinders the ability of clinicians to engage with cannabis research or offer clear guidance. The U.S. federal government continues to classify cannabis as a Schedule I Controlled Substance, by definition meaning it has no accepted medical use and is unsafe to use even under medical supervision. This position cripples the ability of clinicians to advise patients or to influence the burgeoning cannabis industry.

Scientific and medical cannabis research in the U.S. lags behind other nations. While the past decades have witnessed exponential growth of compelling research on cannabis safety and therapeutics, most of it comes from international sources in Europe and Israel, as federal prohibition in this country obstructs open scientific investigation of cannabis. Without clinical guidance or a coherent regulatory framework, the U.S. cannabis industry is failing to provide consumers and medical patients with much-needed guidance on appropriate use and crucial guarantees of product safety. In order to develop a regulated cannabis industry founded on scientific research, significant shifts in U.S. cannabis policy are needed, particularly at the federal level.

Building New Foundations In The Cannabis Industry

Comments to the U.S. Dept. of Agriculture – Establishment of a Domestic Hemp Production Program

In October 2020, NCIA’s Policy Council, Hemp Committee, and Scientific Advisory Committee collaborated to submit comments to the U.S. Department of Agriculture in response to a reopening of the comment period to gather additional information on the establishment of final rules for domestic hemp production.

NCIA and Arcview Filed Amicus Brief in U.S. Supreme Court – Washington v. Barr

Law firm of Wilson Elser files Amicus Brief on behalf of NCIA and Arcview in a landmark U.S. Supreme Court case of Washington v. Barr, which challenges the constitutional legality of prohibition.

The Key to Consumer Safety: Displacing the Illicit Cannabis Market – Recommendations for Safe Vaping

As reports began to appear of a potential linkage between lung injuries and use of nicotine and/or cannabis vaping products, NCIA’s Policy Council established a Safe Vaping Task Force to provide a consistent response on behalf of the concerned members of the regulated cannabis industry. The Task Force’s mission was to communicate clearly in response to press reports and governmental actions, and articulate the state-legal cannabis industry’s fulsome efforts to act with integrity as responsible actors.

Today, it appears that public health experts have concluded that additives from the illicit market appear to be the primary cause of this crisis. While that work continues, we attempt to clear up some of the myths that exist about vaping cannabis oil and offer explanations for other potential dangers and strategies for minimizing risk.

Comment To The U.S. Department Of Agriculture: Establishment Of A Domestic Hemp Production

In November 2019, NCIA’s Policy Council and Hemp Committee collaborated to submit comments to the U.S. Department of Agriculture on establishing a domestic hemp production program.

Safe Vaping Task Force: NCIA Testimony Before The U.S. Senate Committee On Health, Education, Labor, and Pensions

In late 2019, the Center for Disease Control (CDC) identified a probable proximate cause of recent vaping injuries and deaths. Shortly after, the United States Senate (HELP Committee) held a hearing on Wednesday, November 13, on the vaping crisis, where CDC officials testified.

NCIA Policy Council’s Safe Vaping Task Force also submitted testimony for the record.

NCIA’s Policy Council calls for de-scheduling and regulation at the federal level to displace the illegal, untested, unregulated illicit market. It’s time for Congress to act. We can no longer sit by and watch as people are sickened by unregulated, untested, and dangerous products from the illicit market.

Adapting A Regulatory Framework For The Emerging Cannabis Industry

With the prohibition era nearing its end, it is imperative to begin discussing how to shape an effective, comprehensive cannabis regulatory framework. The system proposed in our white paper would allow all cannabis products to flow to the market through a regulatory scheme designed to best advance the policy goals raised by these products. It builds off the existing expertise of federal agencies and the developing state-level industry. Potentially intoxicating products and those making medical claims will be sold through controlled systems that limit their availability, while non-intoxicating products will not be hampered by those same restrictions. Our proposed system would end prohibition in a thoughtful and comprehensive manner, ensuring that the mistakes of the previous era do not negatively affect the opportunities that are at our doorstep.

NCIA Testimony Before The U.S. House Of Representatives Committee On Small Businesses In The Cannabis Industry

Increasing Equity In The Cannabis Industry: Six Achievable Goals For Policy Makers (March 2019)

With cannabis now fully legal for adults in ten U.S. states and the District of Columbia – and more elected officials considering legalization in other states every day – it appears as if the complete end of cannabis prohibition is nearly upon us. As we reach this milestone, we must acknowledge that cannabis prohibition was not only an attempt at preventing individuals from possessing and using cannabis, but also an accompanying criminal punishment regime that enforced this prohibition through government force. This system, like most other law enforcement regimes, did not affect everyone equally.

Although cannabis legalization ends prohibition, it does not necessarily stop or reverse the harm created by the punishment regime. As state-level legalization spreads and the legal cannabis market expands, the individuals and communities most impacted by cannabis prohibition have all too often been left behind. These laws and regulations related to entry into the industry, like cannabis prohibition before it, have disproportionately impacted people of color.

To create a legal cannabis market accessible to all, the laws need to be designed and implemented with equity and fairness in mind.