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IRS Reaffirms Tax Rules Amid Marijuana’s Schedule I Status: Section 280E Explained

(photo: Bloomberg Tax)

The IRS has reiterated that despite state legalization, marijuana businesses are subject to stringent tax rules under Section 280E due to marijuana’s federal Schedule I status.

IRS Reaffirms Tax Rules Amid Marijuana’s Schedule I Status

Marijuana businesses face stringent tax rules under Section 280E due to federal Schedule I classification preventing them from claiming deductions. The IRS clarified that recent refund claims under this section are not valid under current law reaffirming its commitment to enforcing existing tax regulations.

Potential Rescheduling Offers Hope Amid Tax Challenges

President Biden’s administration is moving towards rescheduling marijuana from Schedule I to Schedule III which has generated optimism among industry stakeholders. This reclassification could potentially ease tax burdens imposed by Section 280E. Despite this proposal, the IRS emphasized that until a final rule is published, marijuana remains a Schedule I substance, and current tax laws apply, according to the report of Benzinga.

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(photo: IRS)

Industry Pursues Refunds Amid Legislative Efforts

Multi-state marijuana operators like Trulieve Cannabis Corp and TerrAscend Corp seek tax refunds under Section 280E, highlighting financial strain. Efforts in Congress including Rep. Earl Blumenauer’s bill, aim to allow federal tax deductions for state-legal marijuana businesses, reflecting growing support for industry tax reform. Ongoing legislative and regulatory developments will shape marijuana business finances.

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