U.S Supreme Court Decisions on Tax Fines Gives Marijuana Industry Hope Around Burdens of IRS’ 280E


U.S Supreme Court Decisions


According to tax experts, the marijuana industry in California could face significant ramifications after this week’s decision by the U.S Supreme Court to disregard Colorado Supreme Court ruling on a tax fine as well as other nonconforming opinions on a case involving a medical marijuana company in California.

According to the U.S. Supreme Court, under the Eighth Amendment to the U.S.

Constitution, the levy against Dami Hospitality by the Colorado Department of labors was excessive.

According to a cannabis tax attorney working with Greenspoon Marder, Denver, Nick Richards, the Supreme Court Decision quoting the Eighth Amendment helped shed new light on possible limitations and defenses against Internal Revenue Code (IRC) Section 280E.

The two rulings made by the Supreme Court may have weakened Section 280E of the Internal Revenue Code, which could be good news for the marijuana industry because by dismissing the Colorado case, the U.S. Supreme Court could open the door to challenges to 280E. Besides, if they are successful in challenging 280E, it would be a boon for the marijuana sector since the IRS stipulates that businesses involved in the smuggling of Schedule 1 substances, such as marijuana must pay income tax but cannot take tax deductions.

The second decision on dissenting opinions further casts doubts on 280E.

According to Colorado Sun, in the Colorado case against Dami, the Owner of the Star Motel based in Denver, who was fined $425,000 for neglecting his worker’s compensation insurance cover for about 1,700 days until July 2014.

Colorado Sun further reported that in his appeal, Dami said that he did not have the money to pay the levy, which he also contended that it violated the Eighth Amendment. The Colorado Supreme Court ruling favored Dami.

Last year in October, U.S.Tax Court was challenged by Northern California Small Business Assistants, a medical marijuana firm based in California for IRS ruling, which rejected the company’s claim of $1.5 million in tax deductions for business expenses in the fiscal year 2012. However, the challenge was unsuccessful.

In his dissent, which was signed on by two other judges hearing the case, the U.S. Tax Court Judge David Gustafson wrote that under the Eighth Amendment, the fine charged under IRC Section 280E was unconstitutionally excessive.

Judge Gustafson further stated that since Section 280E is unlimited and applies to every deduction and credits paid or incurred during marijuana sales, it could result in excess income tax, which violates the 16th Amendment. Thus, under the Eighth Amendment, the penalty is considered excessive.

In an email to Marijuana Business Daily, Gustafson who sits on the counsel on numerous states and national marijuana tax issues said that businesses in the marijuana sector are riddled with millions of dollars in tax debts, which they cannot pay.

Diving deeper into Section 280E, former IRS attorney, Richard said that if the IRS were to consider the company’s ability to pay a fine before conducting the assessment and collecting the liabilities, the outcome would be different.


Medcare 2023 event

Terms and Conditions for Entry into Medcare Farms Puff Party(Required)
| Age Requirement: You confirm that you are 21 years of age or older at the time of entering the Event. Valid government-issued photo identification must be presented upon request. | Compliance with Laws: You agree to comply with all federal, state, and local laws and regulations, including those pertaining to the use, possession, and distribution of any substances allowed or provided at the Event. | Liability Waiver: You acknowledge that participation in the Event is at your own risk. Medcare Farms, its affiliates, sponsors, representatives, and employees are not liable for any personal injury, loss, damages, or expenses incurred by you or any person accompanying you to the Event. | No Resale or Transfer: Your entry to the Event is personal to you; tickets or invitations cannot be sold, transferred, or exchanged for any compensation without the express permission of Medcare Farms. | Conduct: You agree to conduct yourself in a manner that is respectful and safe. Medcare Farms reserves the right to remove any participant from the Event for behavior deemed inappropriate, disruptive, or dangerous, without refund or compensation. | Use of Likeness: You grant Medcare Farms and its affiliates the right to use your likeness, image, and voice in photographs, videos, or other digital media taken at the Event, in any and all of its publications, including web-based publications, without payment or other consideration. | Privacy: Personal information collected during the survey and registration process will be used in accordance with Medcare Farms’ Privacy Policy. This information will be used for event management and, unless you opt-out, for informing you of future events and promotions. | Indemnification: You agree to indemnify and hold harmless Medcare Farms and its affiliates, officers, employees, and agents from and against any claims, liabilities, damages, losses, and expenses, including without limitation, reasonable attorney fees and costs, arising out of or in any way connected with your participation in the Event. | Acceptance of Risk: You acknowledge that there are inherent risks involved in attending the Event and that you voluntarily assume those risks. | Severability: If any term or provision of these Terms and Conditions is found to be invalid, illegal, or unenforceable, the remainder of the Terms and Conditions will remain in full force and effect. | Governing Law: These Terms and Conditions shall be governed by and construed in accordance with the laws of the state in which the Event is held, without giving effect to any principles of conflicts of law. | By checking this box, I confirm that I have read, understood, and agree to be bound by these Terms and Conditions.

Related Articles

Puff Party 2023

Medcare Farm’s Puff Party 2023 Welcome to Medcare Farms’ 2023 Puff Party, Complete our brief entry form to enjoy live

Read More »
Med CareLogo large

Are you over 21 years old?

Call Now Button