SCOTUS Set to Decide whether to Hear a Section 280E Cannabis Case (March 5, 2021)

05 Mar 2021 | News

Marvin J. Miller |

March 5, 2021

SCOTUS Set to Decide whether to Hear a Section 280E Cannabis Case

To our Clients and Friends:

On March 19 the U.S. Supreme Court will consider whether to take on a cannabis company’s appeal from the Tenth Circuit in a Section 280E matter.

The case, Standing Akimbo, LLC, et al., Petitioners v. United States, involves summonses issued by the Internal Revenue Service in connection with an examination of a marijuana dispensary’s federal tax returns.  The purpose of the summonses, according to the IRS, was to determine whether the dispensary deducted certain costs of sales and operating expenses in violation of Section 280E of the Internal Revenue Code. That law prohibits a taxpayer from deducting any costs or expenses related to an “illegal business,” which in this case involved "trafficking" certain narcotics listed on Schedule I or II of the US federal Controlled Substances Act.  As marijuana is currently a Schedule I narcotic, the IRS’s position is that no expenses related to the purchase or sale of marijuana are deductible for purposes of federal tax laws. The dispensary in question here is located in Colorado, where its operations are lawful.

The petitioner, Standing Akimbo, LLC, argues, among other things, that the federal tax statute denying the deduction violates the 16th Amendment of the U.S. Constitution. That amendment empowers the federal government “to lay and collect taxes on incomes, from whatever source derived.”  Generally “incomes” is thought to mean “profit,” not gross income. If that were found to be correct then any disallowance of an otherwise legitimate deduction from gross income, such as the cost of purchasing marijuana for re-sale, would be unconstitutional. This argument has been unsuccessfully raised before.

For further information or any questions on this case and Section 280E, please contact Marvin Miller (, Head of CMX’s Cannabinoids and Psychotherapeutics Practice Group or Robert Morrow (, Head of CMX’s Tax Practice Group.

CMXLaw has offices in New York and California.

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