The following is an article written by Bloomberg Tax regarding our recent case filed in the Supreme Court of the United States, which can also be found here: https://news.bloombergtax.com/daily-tax-report/marijuana-dispensary-takes-tax-break-dispute-to-supreme-court?context=search&index=0
A marijuana dispensary is urging the U.S. Supreme Court to weigh in on its dispute with the IRS over improper business deductions.
At the center of the case is tax code Section 280E, which says that a business that consists of trafficking in a Schedule I or II controlled substance can’t receive any tax deductions—and state-legal marijuana businesses currently fall under that restriction.
The code section violates the 16th Amendment of the U.S. Constitution, and the U.S. Court of Appeals for the Tenth Circuit mistakenly concluded that the Controlled Substances Act “reigns supreme” over Colorado cannabis laws, Standing Akimbo said in its petition to the high court.
The 16th Amendment says Congress’s power to tax is limited to taxing income. “It is not a legitimate purpose for the IRS to use its summons power to enforce §280E, an unconstitutional tax,” the petition said.
The Tenth Circuit in April upheld IRS summonses used as the agency tried to determine if the Denver-based company took advantage of barred tax deductions. The court said that the IRS had a legitimate purpose to issue the summons. Standing Akimbo was denied a rehearing in June.
James D. Thorburn of Thorburn Walker LLC, counsel for Standing Akimbo, said in a statement Monday that the petition “addresses the core federalism issue which has besieged this country since the state legalization of cannabis. Accepting the Petition means that the Supreme Court can definitively answer the issue of whether those who have acted in accordance with the marijuana laws of 37 states are, in fact, federal criminals.”
The petition was filed Monday but isn’t yet available on the Supreme Court’s website. The court’s Public Information Office didn’t return a request for comment. The IRS didn’t return a request for comment.
The case is Standing Akimbo, LLC v United States, U.S., petition filed 11/9/20.
To contact the reporter on this story: Jeffery Leon in Washington at jleon@bloombergtax.com
To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com