Challenging 280E: Justifications for Taking Deductions and Amending Tax Returns

MJBIZ Webinar: Challenging 280E: Justifications for Taking Deductions and Amending Tax Returns

by Uncategorised
Challenging 280E: Justifications for Taking Deductions and Amending Tax Returns

Challenging 280E: Justifications for Taking Deductions and Amending Tax Returns

With recent shifts in federal policy, cannabis businesses face an unprecedented opportunity to challenge 280E. Despite the IRS’s warnings of increased enforcement against companies that do not comply, the cannabis industry is taking bold action by amending tax returns and refusing to reduce deductions.

Numerous cannabis operators, including Curaleaf, Cresco Labs, and Ascend Wellness, have announced their intentions to prepare tax returns without reducing deductions for 280E. Sparked by Trulieve’s receipt of a $113,000,000 refund following amended filings, many businesses are now amending their own returns to reclaim lost deductions. Additionally, industry leaders like Canna Provisions and Verano Holdings Corp. have taken their case to the U.S. Court of Appeals, asserting that the Controlled Substances Act (CSA) should not apply in states with regulated cannabis industries. Finally, a compelling argument asserts that cannabis never met the criteria for a Schedule I drug designation. The DOJ itself concluded that the DEA’s test for defining cannabis as a Schedule I substance was “impermissibly narrow,” raising questions about whether 280E applies to cannabis as the code is written.

Join us for the upcoming webinar, “Challenging 280E: Justifications for Taking Deductions and Amending Tax Returns.” This in-depth session will dive into:

· A historical overview of the cannabis industry’s strategies to mitigate the effects of 280E, including discussions and applications of tax code sections 263(a), 471(a), and 471(c).

· The justifications being used by MSOs like Trulieve to amend tax returns and reclaim disallowed deductions.

· The lawsuit pursued by Verano Holdings and Canna Provisions and its implications if successful.

· Recent Supreme Court actions that undermine the applicability of the CSA and, therefore, 280E.

· The implications of the imminent reclassification of cannabis to a Schedule III substance.

· The statutes of limitations for amending returns and the potential risks of taking bold actions.

Register Here
MJ BIzcon with Justin

Justin to be speaking at MJBizCon Dec 3-6.

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MJ BIzcon with Justin

The Future of Cannabis Investment in a Post-280E Landscape

We’re thrilled to announce that Calyx CPA’s own CEO, Justin Botillier, will be speaking at MJBizCon 2024 in Las Vegas! Join Justin and other industry leaders as they dive into “Understanding the Investment Landscape in a Post-280E Environment.” This is an invaluable opportunity for anyone invested in the cannabis sector to gain insight into what the future holds as the regulatory landscape evolves.

📅 When: Tuesday, Dec 3 at 11:20 AM
📍 Where: Las Vegas Convention Center
🎟️ Get 20% off your ticket with the code MIGL24SPK Sign Up Here

This panel will feature experts from across the cannabis finance and investment sectors, including:

  • Melissa Diaz – Rebel Rock
  • Josephine Giordano – BeachFleischman PLLC
  • Adam Goers – The Cannabist Company

Whether you’re looking to refine your investment strategy or understand the implications of shifting tax policies, this discussion is not to be missed. Secure your spot today and join us in navigating this transformative time for the cannabis industry!

The Unfair Burden of Measure 119

The Unfair Burden of Measure 119: Why Oregon’s Cannabis Industry Needs Your Voice

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The Unfair Burden of Measure 119

The Unfair Burden of Measure 119: Why Oregon's Cannabis Industry Needs Your Voice

As voters head to the polls, an important issue is on the table that could significantly affect Oregon’s cannabis industry. Measure 119 proposes a requirement for cannabis businesses, including dispensaries and processors, to allow unionizing efforts while exempting the alcohol industry from similar obligations. This creates an unfair burden on cannabis operators in an already highly competitive market.

The Struggles of Cannabis Businesses

Dispensaries and processing businesses in the cannabis sector often operate with narrow profit margins and face intense competition. The addition of compliance costs and administrative demands associated with unionization could prove particularly challenging, especially for smaller businesses with limited resources.

Imbalanced Regulations

What makes this situation even more concerning is the regulatory imbalance created by this measure. While cannabis businesses would be compelled to provide employer neutrality and grant union access to employees, alcohol businesses, regulated by the same agency, the Oregon Liquor and Cannabis Commission (OLCC) are not subject to these requirements. This discrepancy unfairly impacts the cannabis industry, putting its operators at a disadvantage compared to their alcohol counterparts.

Take Action

Calyx CPA encourages all voters to consider the implications of Measure 119 carefully. By voting NO by November 5th, you can help prevent the undue burden on Oregon’s cannabis dispensaries and processors, ensuring a more level playing field in this competitive market. Your voice matters, let’s protect the future of Oregon’s cannabis industry together!

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Psychedelics Best Business Practices

Psychedelics Best Business Practices | Remind Webinar Oct 31st

by BusinessPsilocybin Industry AccountingPsychadelic Therapy
Psychedelics Best Business Practices

Psychedelics Best Business Practices

Join us for an enlightening session on October 30, 2024, at 2 p.m. ET as we dive deep into the complex world of psychedelic businesses on LinkedIn Live!

This exclusive event features a panel of industry experts ready to share their invaluable knowledge on taxes, insurance, and legal issues specific to the psychedelic sector.

Our distinguished panelists include:

Justin Botillier, CEO of Calyx CPA, who brings a wealth of experience in tax strategies tailored for emerging industries.

Jodi Green, Managing Partner at Antithesis Law, PC, an authority on legal frameworks that guide psychedelic business practices.

Eric Rahn, Founder of Rahn & Associates PSYINS, specializing in insurance solutions for the unique challenges faced by psychedelic entrepreneurs.

Moderated by the insightful Keyaira Lock Adewunmi, Founder of Spice & Sage, this session promises to provide you with the guidance needed to navigate the evolving landscape of psychedelic commerce.

Don’t miss out on this opportunity to gain expert perspectives and ask your burning questions!

Register Here to join us live! 

psilocybin - Oregon

Advocating for Flexibility: Oregon’s Psilocybin Industry Must Adapt to Stay Ahead

by Accounting TipsCANNABIS INDUSTRY ACCOUNTING

Advocating for Flexibility: Oregon's Psilocybin Industry Must Adapt to Stay Ahead

psilocybin - Oregon

To the Oregon psilocybin industry, the upcoming public comment period offers a critical opportunity to advocate for more flexible regulations that align with Colorado’s model and maintain Oregon’s advantage as a pioneering state in this field. As Colorado finalizes its Natural Medicine Health Act, several provisions might challenge Oregon’s first-to-market position if not addressed proactively.

Here are key points to consider:

1. Expand the Scope of Allowed Activities and Substances: Although Colorado’s framework currently focuses on psilocybin, it’s poised to expand to other natural medicines, like DMT, ibogaine, and certain forms of mescaline. Advocating for a similar framework in Oregon could position the state to support a broader spectrum of natural medicines. This could help Oregon maintain its role as a leader in plant medicine, offering diverse therapeutic options and attracting practitioners and clients from other states.

2. Allow for Flexibility in Service Settings: Colorado permits licensed facilitators to operate outside of designated healing centers, enabling them to provide services in homes, healthcare facilities, and other community settings. This flexibility enhances accessibility and affordability for clients. Oregon’s strict requirement for services to be performed exclusively in licensed service centers could limit access and create higher costs. By expanding the types of permissible service settings, Oregon can ensure broader, more equitable access across the state.

3. Local Control: Colorado’s regulations prevent local governments from entirely prohibiting healing centers but allow them to regulate time, place, and manner of operations. In Oregon, several local jurisdictions have opted out, reducing accessibility for some residents. A statewide policy preventing outright bans but allowing local time and manner restrictions could increase service availability and foster greater industry growth in Oregon.

4. Decriminalization of Personal Use: Colorado has decriminalized personal possession, cultivation, and use of natural medicines like psilocybin, which allows adults 21 and older to possess and use these substances without criminal penalties. While Oregon initially passed Measure 110, which decriminalized small quantities of controlled substances, this has since been repealed, making even small quantities of psychedelics illegal once more. To maintain Oregon’s progressive stance on natural medicine, the state should consider adopting a targeted decriminalization policy specifically for psychedelics, aligning more closely with Colorado’s approach. This move would support safe personal use, encourage responsible exploration of plant medicines, and reduce unnecessary criminalization for low-level possession.

5. Licensing Flexibility: Both states require separate licenses for cultivation, manufacturing, and administration, but Colorado allows licensed professionals from other industries (such as healthcare and mental health services) to operate within licensed healing centers. Oregon could benefit from similar provisions, allowing therapists, counselors, and other licensed professionals to offer complementary services within psilocybin centers. This could encourage a holistic approach to mental health, integrate broader professional expertise, and attract a diverse range of clients.

6. Cultural and Indigenous Sensitivity: Colorado has established a Tribal and Indigenous Working Group to prevent cultural misappropriation and promote respectful practices within the industry. Oregon could incorporate similar measures to ensure that the industry respects Indigenous traditions and involves communities in regulatory development. This approach not only acknowledges cultural heritage but also strengthens the ethical framework for natural medicine services.

By encouraging these adjustments, the Oregon psilocybin industry can leverage public feedback to adopt a more inclusive and flexible framework. This can help sustain Oregon’s competitive edge and expand its reach as other states begin to explore similar regulatory programs.

Sources: Zuber Lawler, “5 Takeaways from Colorado’s Proposition 122 – The Natural Medicine Health Act” – Highlights the provisions for personal use, flexibility in service locations, and future potential expansion to other substances under the NMHA.

Vicente LLP, “The Ultimate Guide to SB23-290, Colorado’s Natural Medicine Regulation and Legalization Bill” – Details on the regulatory framework for licensed facilitators, Indigenous and cultural sensitivity provisions, and licensing structures for natural medicines.

Healing Maps, “Psilocybin Laws in Colorado and Oregon: What’s the Difference?” – Compares Oregon’s psilocybin regulations to Colorado’s, covering topics like local control, decriminalization, and service settings.

The Future of Hemp in Oregon: A Call to Action with Courtney Moran

The Future of Hemp in Oregon: A Call to Action with Courtney Moran

by Uncategorised

The Future of Hemp in Oregon: A Call to Action with Courtney Moran

In this important conversation, Justin Botillier, CEO of Calyx CPA, sits down with Courtney Moran of Earth Law LLC to discuss the recent OLCC public hearing regarding which hemp products will be allowed in Oregon’s OLCC-regulated cannabis marketplace. Courtney, a leading attorney in the hemp and cannabis industries, shares her concerns about the lack of engagement from the industry at the hearing, where only one comment was made despite critical discussions on proposed rule changes. With the public comment period still open, there’s a final opportunity for businesses and individuals to make their voices heard.

 

Urgent Deadline: September 27th for Public Comment

The public comment period ends on September 27th at 12:00 PM, so now is the time to act. You can submit your thoughts and feedback directly to the OLCC by emailing [email protected] before the deadline.

 

How to Shape Hemp Regulation

Watch this video to learn more about the proposed hemp rules, the importance of industry engagement, and how you can influence the future of hemp regulation in Oregon.

 

For more details, be sure to read Courtney’s blog post here: https://www.agriculturalhempsolutions.com/post/olcc-holds-public-hearing-on-proposed-hemp-rulemaking

The Cannabis Journey Back to the Supreme Court: A Conversation with Katie Scates, CPA, JD

The Cannabis Journey Back to the Supreme Court: A Conversation with Katie Scates, CPA, JD

by CANNABIS INDUSTRY ACCOUNTING

The Cannabis Journey Back to the Supreme Court: A Conversation with Katie Scates, CPA, JD

Introducing Katie Scates and Her Unique Expertise

Join Justin Botillier, CEO of Calyx CPA, in a candid conversation with Katie Scates, CPA, JD, the newest member of the Calyx CPA team. With her extensive background in both law and accounting, and specialized knowledge of the cannabis industry, Katie brings a unique perspective on navigating complex tax and legal challenges.

Key Developments in the Cannabis Industry

In this video, Justin and Katie explore the latest developments in the cannabis industry, focusing on the recent appellate brief challenging federal prohibition, as reported by Marijuana Moment.

Cannabis and the Legal Landscape

They discuss the implications of the case’s potential journey back to the Supreme Court, the future of 280E, and the rescheduling of cannabis under the Controlled Substances Act.

Insights for Cannabis Industry Professionals

Whether you’re in the cannabis space or curious about the legal landscape, this engaging discussion provides valuable insights into the future of cannabis regulation and taxation.

Oregon's Cannabis Certificate of Compliance: Insights from Attorney Kevin Jacoby

Navigating Oregon’s Cannabis Certificate of Compliance: Insights from Attorney Kevin Jacob

by Uncategorised

Navigating Oregon’s Certificate of Compliance Requirements for Cannabis Retailers

In this informative video, Kevin Jacoby, owner of Jacoby Law, shares valuable insights into Oregon’s Certificate of Compliance requirements for cannabis retailers. Oregon’s complex tax regulations present significant challenges for cannabis businesses, particularly when it comes to staying compliant with state-level taxes like marijuana sales tax, payroll taxes, and corporate income taxes. Kevin breaks down the specifics of the Certificate of Compliance, including who is required to file, what types of taxes are involved, and the often-overlooked requirement that even individual shareholders and partners must be personally compliant.

Challenges for Cannabis Businesses

Kevin and Justin Botillier, CEO of Calyx CPA, also discuss the controversial aspects of the law, such as the lack of legislative authority behind its implementation and the administrative burden it places on businesses. The conversation highlights how many cannabis operators are struggling to catch up on years of unfiled taxes and the importance of working with experienced professionals to avoid penalties and license issues.

Key Takeaways for Cannabis Retailers

Whether you’re a cannabis retailer in Oregon or simply interested in the intricacies of cannabis tax law, this discussion offers key takeaways on how to navigate the compliance process, potential rule changes, and the steps to take if you’re approaching compliance deadlines. Kevin also shares practical advice on extensions, dealing with the Oregon Liquor and Cannabis Commission (OLCC), and what to expect in the coming years as the state continues to refine its tax requirements for cannabis businesses.

chatgpt Cannabis

When Will Marijuana Be Rescheduled? ChatGpt’s Prediction!

by CANNABIS INDUSTRY ACCOUNTING

When will Marijuana be rescheduled? Chat GPT’s Prediction!

Author Chat GPT 06/21/2024

As we stand on the cusp of a historic shift in U.S. drug policy, the potential rescheduling of cannabis from Schedule I to Schedule III is a topic of significant interest and debate. Here, I leverage the power of ChatGPT, an advanced language model developed by OpenAI, to explore the current process, provide an estimated timeline, and predict when this monumental change might occur.

The Power of ChatGPT

ChatGPT is an extraordinary tool designed to assist with a wide range of tasks, from generating text to answering complex questions. It harnesses the power of deep learning to understand and generate human-like text based on the input it receives. As the author of this blog post, ChatGPT has delved into various sources, analyzed the data, and provided a comprehensive overview of the cannabis rescheduling process. This cutting-edge technology enables us to stay informed and make educated predictions about significant regulatory changes.

The Rescheduling Process

The process to reschedule cannabis officially began on May 16, 2024, when the Attorney General submitted a notice of proposed rulemaking to the Federal Register. This initiated a formal rulemaking process involving several key steps:

Public Comment Period: Once the proposed rule is published, there is a 60-day public comment period during which stakeholders and the general public can submit their opinions and evidence. This period is crucial for gathering diverse perspectives on the proposed change (JD Supra) (Home | Holland & Knight) (Marijuana Moment).

Administrative Hearings: Following the comment period, the DEA may hold administrative hearings if requested by interested parties. These hearings are similar to federal bench trials, involving expert testimonies and detailed reviews of the evidence presented. This phase can significantly extend the timeline, often taking several months (JD Supra) (Marijuana Moment).

Review and Final Rule: After the hearings, the DEA will review all comments and evidence before drafting the final rule. This draft must then be reviewed by the Office of Management and Budget (OMB) and submitted to Congress for a 60-day review period, as required for major rules. This step ensures that the rule undergoes thorough scrutiny before implementation (JD Supra) (Marijuana Moment).

Implementation: Assuming no significant delays or objections, the final rule can be implemented after the Congressional review period. Historically, rescheduling processes can take anywhere from several months to over a year, depending on the complexity and volume of input received (Justice) (Vicente LLP) (Marijuana Moment).

Potential Timeline

Given the expedited nature of recent political and public interest in cannabis reform, it is possible that the rescheduling process could be completed within a year. However, considering the possibility of administrative hearings and extensive public comments, the timeline might extend beyond this optimistic estimate. Comparisons with previous rescheduling efforts, such as hydrocodone combination products, suggest that a final rule could be in place by the end of the second quarter of 2025 (JD Supra) (Vicente LLP) (Marijuana Moment).

Prediction: Based on the current pace and historical precedents, ChatGPT predicts that the rescheduling of cannabis to Schedule III will be finalized on July 1, 2025.

Current Debates and Challenges

The proposal to reschedule cannabis has faced significant opposition from various former DEA officials and Republican state attorneys general. These groups have requested public hearings, arguing that rescheduling would have far-reaching implications and requires a thorough review. They contend that rescheduling could undermine federal efforts to combat drug trafficking and contribute to increased drug abuse (Marijuana Moment) (Marijuana Moment).

On the other hand, proponents of rescheduling argue that it aligns federal policy with the growing acceptance of cannabis for medical use across many states. They highlight the potential benefits, such as removing barriers to research and allowing cannabis businesses to take standard business deductions, which are currently prohibited under IRS Section 280E (Marijuana Moment) (Marijuana Moment) (Marijuana Moment).

Conclusion

The rescheduling of cannabis to Schedule III marks a pivotal moment in U.S. drug policy, reflecting changing societal attitudes and scientific understanding of cannabis. While the process is complex and faces significant hurdles, the move could ultimately pave the way for more comprehensive cannabis reforms in the future.

As this process unfolds, it is crucial for stakeholders to stay informed and engaged, ensuring that all perspectives are considered in shaping the future of cannabis regulation in the United States.

For more detailed updates and to participate in the public comment process, visit the Federal Register and DEA websites. Stay tuned to platforms like Marijuana Moment for ongoing coverage and analysis of this critical issue.

 
Justin

The Future of the Ordinary Business Deduction for Cannabis Businesses

by CANNABIS INDUSTRY ACCOUNTING

 

We recently ran across an article written in May by Joseph A. Peterson, a Senior Attorney at Plunkett Cooney, called Beyond 280E: The Future of the Ordinary Business Deduction for Cannabis Businesses (Here is the link to the article). His article again highlights how 280E has damaged the cannabis business and argues that companies have the constitutional right to claw back their lost deductions. See Justin’s video, which he recorded back in March, for more details (Watch Justin’s video).

Below are the highlights of Joseph’s article. We encourage you to reach out today to verify if you qualify to amend your returns and/or file a protective claim for a refund.

Highlights of Joseph’s Article:

  1. Economic Impact:
    • Medical and recreational cannabis sales could exceed $33.6 billion, with an additional economic impact of $100.8 billion by the end of 2023.
  2. Section 280E Overview:
    • Section 280E disallows tax deductions for ordinary business expenses for businesses involved in “trafficking” controlled substances, including cannabis.
    • Cannabis businesses are only allowed to deduct the Cost of Goods Sold (COGS), leading to significantly higher effective tax rates (up to 70% or higher) compared to other businesses.
  3. Impact on Cannabis Businesses:
    • The restriction of 280E creates financial strain, reducing the ability to reinvest, hire new employees, and expand operations.
    • Efforts to reform 280E include legislative proposals like The Small Business Tax Equity Act and state-level tax relief through decoupling from federal restrictions.
  4. Recent Developments:
    • Two cannabis Multi-State Operators (MSOs), Truelieve and Ascend Wellness Holdings, successfully filed amended returns to claim ordinary business expense deductions previously excluded under 280E.
    • Truelieve received $113 million in tax refunds for the 2019, 2020, and 2021 tax years, and Ascend Wellness Holdings filed for similar refunds for 2020, 2021, and 2022.
    • Both MSOs plan to file 2023 tax returns as normal corporate taxpayers, excluding 280E.
  5. Implications for the Industry:
    • The amended returns by MSOs have set a precedent and sent shockwaves through the cannabis industry.
    • There is anticipation of additional scrutiny and potential litigation from the IRS regarding these refunds.
  6. Recommendations for Cannabis Businesses:
    • Cannabis businesses should consider filing amended protective returns to preserve the ability to claim retroactive refunds if the federal stance on 280E changes.
    • The process involves identifying the basis for the claim, providing sufficient facts, quantifying the refund, meeting filing requirements, and following up after the 280E contingency is resolved.
    • Filing a protective claim can preserve the right to a refund if 280E’s applicability changes.
  7. Legal and Regulatory Context:
    • The U.S. Supreme Court affirmed the federal government’s authority to regulate cannabis under the Commerce Clause.
    • Justice Clarence Thomas and the DOJ have criticized the enforcement of 280E on medical cannabis sales.
    • Businesses should seek specialist advice and monitor legal developments closely.
    •  

We encourage you to contact us today to verify whether you qualify to amend your returns and/or file a protective claim for refund.