The family income split loophole allows small businesses to avoid paying high tax rates on their marginalized income. This article was originally published on WeedWeek, and appears here with permission. Subscribe to one of our newsletters today! Pot Lobbyists Bullish on Post-Election Reform, Five States Legalize Cannabis; Markets Expected to Reach $3.1B, Cannabiz Seeks Federal Reform, Despite Senate Setback, Kushy Punch Wrongful Death Suit Raises Liability Issues, Pet CBD Supplier Can Proceed with Claims in $10M Suit, Cannabiz Eager for Arizona, New Jersey Legalization, Pot Legalization Advocates Prep for Post-Election Push, Calif. Judge Tosses $200M RICO Suit Involving Pot Farmers, IRS Greenlights Tax Loophole for Pot Businesses, “We Only See Green:” PAC Targets “Prohibitionists” in Congress, “Kushy Punch TKO:” Suit Says Brand Made $64M in Illegal Gummies. Advertiser Disclosure: Learn how to invest in marijuana stocks now. by WeedWeek. Discover the best marijuana ETFs traded in American and Canadian exchanges and where and how to buy them. Mann said he is looking forward to the IRS’s response to his appellate filing. Meanwhile, businesses in other industries, such as grocers that prepare food on site, are able to do just that. Willis Jacobson is an award-winning journalist whose career has spanned both coasts. In the appeal, Mann argues that 280E needs to be thrown out due to its unconstitutional application to marijuana businesses. This article was originally published on WeedWeek, and appears here with permission. The flagship WeedWeek newsletter has more than 8,000 subscribers and a weekly open rate above 25%. Many people disagree with me, but I don’t see that they’re motivated by any special animus toward the cannabis industry. Benzinga does not provide investment advice. Find medical coverage and alternatives here. Investing in marijuana doesn't have to be expensive. 0.22, + © 2020 Benzinga.com. Subscribe to Our Free Weekly Newsletters Today! Now based on the Central Coast of California, he has covered cannabis news and issues since 2015. “But, generally speaking, I think the IRS is just trying to administer the tax law as they see it. Subscribe to our free weekly newsletters today. The IRS has updated its guidance for cannabis operators, a move some in the industry view as a rare helping hand from the tax agency. Until now, the question of whether it applies to marijuana businesses has been a source of controversy. Section 471, enacted with 2018’s tax law, enables businesses grossing less than $25M in revenue to deduct a greater portion of their expenses. Get all of the latest deals, hot off the press in to your inbox. “The Internal Revenue Service takes the position that section 280E-affected taxpayers must calculate their cost of goods sold pursuant to Internal Revenue Code section 471 and the associated Treasury Regulations,” read a portion of the update. The very best small business loophole available to you is probably the Subchapter S election. Because cannabis is classified federally as a Schedule I drug under the Controlled Substance Act, the section applies to current businesses, even if they are licensed in their states. Many people disagree with me, but I don’t see that they’re motivated by any special animus toward the cannabis industry. The revised guidance, published Sept. 12, maintains that state-legal marijuana businesses do not qualify for most common business deductions and credits, per Internal Revenue Code Section 280E. Do you own a profitable small business? Section 280E, which was first introduced in the 1980s during the War on Drugs, was intended to stop illegal drug traffickers from claiming business expense deductions. Loopholes are often thought of as the domain of corporations and the business world, but there are quite a few available to individual taxpayers as well. All rights reserved. Share: Willis Jacobson is an award-winning journalist whose career has spanned both coasts. The move, which highlights an already available method and does not introduce any changes to the tax code, could be aimed at getting more marijuana businesses to pay their taxes. Keep your business and your grow operation safe and protected. TD Ameritrade, Inc. and Accretive Capital LLC are separate, unaffiliated companies and are not responsible for each other’s services and products. The main goal of 420 Investor is to provide real-time, objective information about the top marijuana companies in the market in order to help investors capitalize on cannabis. “But, generally speaking, I think the IRS is just trying to administer the tax law as they see it. By Willis Jacobson Sep 16, 2020 . And this guidance proves it. Learn how to insure your cannabis business with our top rated cannabis insurance companies. IRS Greenlights Tax Loophole For Cannabis Businesses. And this guidance proves it. 0.19, + The IRS has updated its guidance for cannabis operators, a move some in the industry view as a rare helping hand from the tax agency. As expected, the Election Day results were top of mind on this week's edition of the Benzinga Cannabis Hour. In the appeal, Mann argues that 280E needs to be thrown out due to its unconstitutional application to marijuana businesses. Because cannabis is classified federally as a Schedule I drug under the Controlled Substance Act, the section applies to current businesses, even if they are licensed in their states. That report also concluded the IRS may have missed out on nearly a quarter-billion dollars in unassessed taxes from cannabis companies suspected of improperly deducting business expenses in California, Oregon and Washington over the past five years. Mann said he is looking forward to the IRS’s response to his appellate filing. Section 280E, which the industry despises, puts strict limits on which taxes cannabis businesses can deduct, forcing them to pay a far higher effective tax rate than conventional businesses. Check out the best CBD softgels online in 2020 and try one for yourself! The use of Section 471, as advised in the IRS update, could provide some relief. Compare our top recommendations for brokers and find your match to start trading today. MOJAVE JANE BRANDS INC by Mojave Jane Brands Inc. Invesco S&P 500 Equal Weight Industrials Portfolio, CloudMD Software & Services Inc Ordinary Shares. This is the IRS saying, ‘Here are the rules of the game, guys.’”.