The American Institute of CPAs (AICPA) has called on the Department of Treasury and the Internal Revenue Service (IRS) to provide guidance for cannabis businesses as the federal government moves to reschedule cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act. This change would remove state-approved cannabis businesses from the constraints of Section 280E of the tax code, which prohibits the deduction of most business expenses.
In a statement, Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, highlighted the challenges cannabis businesses and their CPAs have faced. “Since the beginning of the decriminalization and legalization of marijuana across a growing number of states, cannabis businesses and their CPAs have struggled to walk the tightrope of an industry that is locally legal but federally illegal,” said Lauridsen.
The AICPA’s letter to the IRS includes several key recommendations, such as retroactive treatment for previously disallowed expenses, addressing tax issues arising from Section 280E, ensuring uniform tax treatment for cannabis businesses, and creating a voluntary disclosure program for businesses impacted by the rescheduling.
As the federal government takes steps to reform cannabis regulations, the AICPA urges clear tax guidance to help businesses comply with their obligations and avoid potential penalties.
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