Biden Appointee Supports IRS Investigations of Cannabis Brands
The Acting Solicitor General of the United States Elizabeth Prelogar filed a brief this week supporting IRS investigations into state-legal cannabis companies under Section 280E.
“…The court of appeals merely explained, correctly, that the federal prohibition on trafficking marijuana is itself a sufficient basis for the IRS to investigate potential violations of Section 280E by petitioners, irrespective of state law. … The court of appeals was also plainly correct that the Controlled Substances Act would preempt Colorado law in the event of any conflict. Colorado may, of course, choose not to prohibit conduct that federal law prohibits. … Under the Supremacy Clause, however, Colorado may not authorize individuals or businesses to violate federal law.” – Prelogar in the May 24, 2020 brief
Section 280E of the federal tax code does not allow “any trade or business…that consists of trafficking controlled substances” to deduct normal business expenses, whether or not their business is approved by the state in which they operate.
Earlier this month, the U.S. Supreme Court declined to hear a separate 280E challenge but the court said the denial was based on late petition filing.
In February, Prelogar filed a brief in another 280E case with the Supreme Court, brought by Denver, Colorado-based Standing Akimbo, making the same arguments, according to a Colorado Politics report.
“Marijuana is listed on Schedule I of the Controlled Substances Act … without any exception for ‘state-legal’ marijuana,” Prelogar wrote in the February 12 brief. “States may not countermand Congress’s decision to prohibit trafficking in marijuana. Such activity violates federal law even when it does not independently violate state law (and even when it is affirmatively permitted by state law).”
James D. Thorburn, the attorney for Standing Akimbo, told Colorado Politics that the filing shows the administration of President Joe Biden(D) is continuing to argue state-approved cannabis legalization is essentially legally void.