This CLE course examines the federal income tax issues that affect businesses operating in the state-regulated cannabis industry. While some states permit businesses to cultivate, manufacture, and sell cannabis within a regulated market, cannabis remains illegal under federal law. Section 280E of the Internal Revenue Code disallows income tax deductions for businesses trafficking in a Schedule I controlled substance, such as cannabis.

This course covers four key areas. First, it provides a high-level overview of IRC Section 280E, including its history, application, and historically significant court cases. Next, it offers a brief update on federal efforts to reschedule cannabis.

The course then discusses current case law, including the arguments raised in Canna Provisions and the ongoing Tax Court case New Mexico Top Organics (d/b/a Ultra Health). Finally, it explores considerations for businesses operating under the ongoing uncertainty surrounding cannabis rescheduling.