The IRS Has a New Weapon in Its War on Weed

It should go without saying that the federal government is no friend to legal cannabis.

Since the late 1970s, when the nation’s first medical cannabis law was passed by the New Mexico state legislature, the feds have been pushing back against state-level decriminalization through every government agency available, from the DOJ and FBI to the NIDA and FDA. Then of course, there’s that crucial but often overlooked ingredient in the scalding hot alphabet soup the feds force feed state-level decriminalization efforts: the IRS.

Nobody loves the IRS — this isn’t exactly a cannabis industry thing — but most industries see the agency’s existence as a necessary evil. Then again, for most industries, it represents little more than a regularly scheduled fiscal inconvenience. For legal cannabis companies, the IRS is more than just an expensive annoyance; it’s a major obstacle that can make operating a business prohibitively expensive.

There are numerous ways the federal government uses the tax code to undercut legal cannabis, chief among them Section 280E of the tax code, which bans the deduction of basic business expenses by companies involved in business connected to the sale of Schedule I or II substances, which the IRS considers “trafficking.” >>>

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