In a letter to the U.S. Department of Treasury and the IRS, the American Institute of CPAs (AICPA) is trying to provide guidance aimed at cannabis businesses and tax professionals ahead of potential marijuana rescheduling.
“Since the beginning of 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,” Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, wrote in the letter.
“It’s imperative that the federal government’s tax administration bodies provide guidance to these profitable businesses and their advisers in advance of the rescheduling of marijuana to help ensure a clear understanding of their federal tax obligations and mitigate non-compliance.”
The AICPA’s recommendations include:
- Retroactive expense treatment for Section 280E of the Internal Revenue Code: The AICPA suggested that the Treasury and IRS allow cannabis businesses to deduct expenses for the entire tax year in which marijuana is rescheduled, exempting them from 280E for that year and going forward.
- Clarification on previous Section 280E disallowance: The CPA organization advises that guidance clarify the tax treatment if issues stemming from the removal of 280E arise, including changes in accounting year, partnership basis and depreciation.
- Uniform tax treatment: The AICPA suggest that the Treasury and IRS ensure that 280E is uniformly applied to all legally operating cannabis businesses in rescheduling marijuana as a Schedule 3 controlled substance, whether for medical or adult-use marijuana sales.
- Voluntary disclosure program: The AICPA proposes a voluntary disclosure program for cannabis businesses no longer subject to 280E after marijuana’s rescheduling.
The letter was prompted by the U.S. Department of Justice’s May proposal to move marijuana from Schedule 1 to Schedule 3 of the Controlled Substances Act, which would remove it from the federal government’s list of the most dangerous drugs on Schedule 1.