Since 1996, the states and the federal government have been in a dispute over the legalization of cannabis. Thirty-six states have legalized cannabis in some manner, while the federal government has been adamant it is federally illegal. The most effective weapon the federal government has utilized in the dispute is Section 280E of the Tax Code – denying all deductions and credits to state legal cannabis business. This CLE will discuss how the IRS utilized Section 280E and the current defenses and successes which have been utilized and discuss how this tax code provision can be utilized with small cannabis business
Key topics to be discussed:
The federalism dispute rages: Just because cannabis is state legal does not stop federal enforcement attempts using the Tax Code
Costs of goods sold is constitutionally protected under the Sixteenth Amendment: There are numerous ways to reduce tax liability using this constitutional protection
IRC Section 471(c), as amended in the Tax Cuts and Jobs Act, has created a workaround to Section 280E
Date: December 19, 2022
Jim Thorburn | Thorburn Law Group LLC
Jim Thorburn has been an attorney since 1991. He is a founding partner of Thorburn Law Group LLC located in the Denver Tech Center, Colorado.
Jim’s primary background is commercial litigation in both state and federal courts. Prior to entering the cannabis practice, his primary focus was litigation in the real estate and construction fields. Beginning in 2012, Jim began emphasizing cannabis tax controversy law, taking on some of the most notable cannabis tax controversy cases in the nation. This experience made Jim a formidable force in cannabis tax controversy.
Jim’s most recent success is obtaining a Statement Opinion from Justice Clarence Thomas in his advocacy of Standing Akimbo, LLC v. United States, 141 S. Ct. 2236, 2237 (2021)(Thomas, J.), Justice Thomas questions whether the federal government has exceeded its commerce clause powers by continuing to ban cannabis on a federal level. As msn.com noted: “ Legal experts were quick to take note of Thomas’ statement as a harbinger of the imminent demise of federal authority to regulate marijuana.” Jim was the lead litigating attorney for Alpenglow Botanicals v. United States, 894 F.3d 1187 (10th Cir. 2018) where the Tenth Circuit Court found that exclusion of costs of goods sold from income is constitutional right. Also, Jim had the honor of arguing the Feinberg v. Commissioner, 808 F.3d 813 (10th Cir. 2015) in front of now Justice Neil Gorsuch. The published decision has been described as a “technical loss but an artful win for the cannabis industry.”
Jim is on the forefront of the current federal and state issues affecting dispensaries and works hard to achieve successful outcomes for his clients. Jim works with state and national legislators to effect positive legislative change for the cannabis industry. He helps dispensaries, grow facilities, and other businesses navigate through complex federal legal issues including tax court and IRS audits. In addition to Section 280E issues, Jim also provides real estate, land use, construction law, and general business representation, and helps dispensaries comply with the regulations under state cannabis laws.
As a result of Jim’s national recognition, Jim speaks on marijuana legal issues across the country. Jim is a featured expert for the National Cannabis Industry Association. Jim has been featured in all the major networks, Forbes Magazine, INC. Magazine, MJ Biz Daily, HBO (Vice News), Denver Post, Law360, Yahoo Finance, National Law Journal, The Cannifornian, and others.
Jim received the coveted 2019 National Law Journal Cannabis Law Trailblazer Award.
Jim is also actively involved in motorsports and is the Past President of the Rocky Mountain Region Porsche Club of America. He is also a PCA trained high-performance driving instructor. PCA is a Porsche enthusiast club with over 120,000 members nationally, making it the largest single-marque car club in the world. Rocky Mountain Region PCA is the sixth largest PCA region in the United States with over 3200 members.
I. The federalism dispute rages | 12:00pm – 12:20pm
II. Costs of goods sold is constitutionally protected under the Sixteenth Amendment | 12:20pm – 12:40pm