On May 23, 2018, we published revised versions of our Privacy Policy and User Agreements. Please read these updated terms and take some time to understand them. Your use of our services is subject to these revised terms.
Yes, I Agree.

420 with CNW — Rescheduling Cannabis Would Free Some Marijuana Companies from Section 280E

Earlier this year, the Department of Health and Human Services recommended that cannabis be moved to Schedule III of the Controlled Substances Act. This recommendation is currently being reviewed by the U.S. Drug Enforcement Agency (DEA). In the event that marijuana is reclassified, cannabis companies will no longer be affected by Section 280E of the IRS code.

Section 280E specifically forbids any business linked to the trafficking of substances classified under Schedule I or II from deducting business expenses from their federal tax returns. Surprisingly, however, the cost of goods sold, whether it’s drugs or other products, is still an allowable deduction.

This change will allow cannabis businesses to claim deductions for business expenses incurred during the financial year.

Section 280E was introduced in the early 1980s when Congress amended the tax code following a court ruling that allowed Jeff Edmondson, a convicted cannabis and cocaine trafficker, to claim deductions for expenses incurred during the sale of drugs.

Whitney Economics cofounder Beau Whitney believes the tax code affects cannabis retailers the most. As per his estimations, cannabis retailers in America collectively pay about $2 billion more on their federal returns. If section 280E didn’t apply, these businesses would be able to deduct their expenses.

In total, these monies add up to a tax rate in excess of 70%, almost four times higher than the 21% tax that other businesses pay on corporate income. This doesn’t mean that growers and manufacturers aren’t affected; they are, just to a lesser extent, because they usually aren’t paid until their products are sold.

It is expected that the DEA may reschedule cannabis in the first half of 2024. This change is expected to significantly decrease the cost structure of the marijuana industry, particularly for the retailers. The reduced tax burden could also lead to a decrease in retail prices for consumers, which could cause demand for marijuana products to increase.

Additionally, businesses would be able to plough returns back into their businesses. Adam Goers, senior VP for The Cannabist Co., stated that the loss of 280E would bring additional capital to the industry, for both small and large firms.  This together with SAFE Banking, he noted, would establish a sustainable industry and allow focus to shift toward the federal legalization of marijuana. At the moment, however, marijuana remains classified as a Schedule I drug. Drugs under this classification are identified as having no accepted medical use and a high potential for abuse.

The anticipated scheduling change would be a big boost to the cannabis industry, including companies such as TerrAscend Corp. (TSX: TSND) (OTCQX: TSNDF) that would not only benefit from getting relief from 280E but would also be able to access more institutional capital to expand their operations.

About CNW420

CNW420 spotlights the latest developments in the rapidly evolving cannabis industry through the release of two informative articles each business day. Our concise, informative content serves as a gateway for investors interested in the legalized cannabis sector and provides updates on how regulatory developments may impact financial markets. Articles are released each business day at 4:20 a.m. and 4:20 p.m. Eastern – our tribute to the time synonymous with cannabis culture. If marijuana and the burgeoning industry surrounding it are on your radar, CNW420 is for you! Check back daily to stay up-to-date on the latest milestones in the fast -changing world of cannabis.

To receive SMS alerts from CNW, text CANNABIS to 888-902-4192 (U.S. Mobile Phones Only)

For more information, please visit https://www.CannabisNewsWire.com

Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: https://www.CannabisNewsWire.com/Disclaimer

Denver, CO
303.498.7722 Office

CannabisNewsWire is powered by IBN


Select A Month

Official NewsWire Relationships

Alternative Products Expo Benzinga Cannabis Capital Conference Cannabis Business Summit & Expo 2019 Cannabis Drinks Expo Cannabis World Congress & Business Exposition Cannexpo Marigold PR MjMicro Conference New England Cannabis Network O'Cannabiz Conference & Expo Tether BudTender Tether BudTender Appreciation Week

CannabisNewsWire Currently Accepts



Bitcoin Cash

Bitcoin Cash

Doge Coin






USD Coin

USD Coin

Contact us: 303.498.7722