The Supreme Court rejects the IRS contesting cannabis tax enforcement
July 16, 2021
Husch Blackwell LLP
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On June 21, 2021, the U.S. Supreme Court declined to hear Eric D. Speidell et al., Petitioners v. In this case, the Tenth Circuit rejected the argument from several Colorado medical marijuana dispensaries that the Internal Revenue Service (IRS) had no authority to investigate whether a taxpayer is trading in controlled substances. With the Supreme Court declining to hear the case, the 10th district ruling remains in place and taxpayers can reasonably expect courts across the country to achieve similar results to the 10th district. Marijuana-related businesses can expect the IRS to continue to aggressively enforce Section 280E of the Internal Revenue Code.
Section 280E limits most allowances for business transactions with government-defined controlled substances. The Speidell petitioners argued that determining whether something was a controlled substance was a quasi-criminal task and was outside the IRS review authority. The Tenth Circuit rejected this argument, believing that Section 280E investigations were the responsibility of the IRS. In May, the von Biden government denied the petitioners’ request for Supreme Court review, signaling the IRS’s intention to continue aggressively enforcing Section 280E.
What that means for you
While the Speidell petition was considered unlikely by most commentators, the Supreme Court’s decision not to hear the case means that a Section 280E legal remedy is unlikely to materialize anytime soon. Any change in tax law related to marijuana businesses will likely need to be legislative.
The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.
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