Handling Cannabis Tax Examinations: Sec. 280E, Audits, IRS Guidance, Reporting Requirements

Recording of a 90-minute premium CLE/CPE video webinar with Q&A


Conducted on Wednesday, March 24, 2021

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers guidance on effective methods in handling IRS cannabis tax examinations for businesses engaged in the cannabis industry. The panel will discuss key federal and select state tax law provisions impacting marijuana businesses, key items of focus by the IRS when examining cannabis operations, and techniques in managing audits.

Description

The sale and distribution of cannabis for recreational or medical use is a powerful economic engine generating billions in annual revenue, with over 40 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, without careful planning, regulated cannabis businesses can be subject to hefty tax assessments and penalties.

Under Section 61, all gross income must be reported from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for cost of goods sold (COGS), resulting in a substantially higher tax rate than other companies on their income. The IRS issued guidance to its agents on conducting audits of cannabis businesses giving IRS agents the authority to change a cannabis business' accounting method. Under Section 280E, certain costs are not included in COGS. Thus, they remain non-deductible for income tax purposes.

As more states legalize cannabis and make available licenses to grow, manufacture, distribute, and sell cannabis, the IRS has increased cannabis tax audits, which could result in unbearable tax liabilities.

Listen as our panel discusses federal and select state tax law provisions impacting cannabis businesses, key items of focus by the IRS when examining cannabis operations, and tactics for managing audits.

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Outline

  1. Federal and state tax law issues for cannabis businesses
  2. Key planning strategies to minimize tax liability and avoid audits
    1. Section 280E
    2. Ownership structures
    3. Deductions
  3. Navigating IRS examinations of cannabis businesses

Benefits

The panel will review these and other key issues:

  • Federal and select state tax law provisions impacting cannabis businesses
  • Application of tax rules to the cannabis industry and key planning techniques
  • Key issues raised and techniques in handling IRS examinations
  • Effect of Section 280E and deduction of the cost of goods sold

Faculty

Brown, Sandra
Sandra R. Brown

Principal
Hochman Salkin Toscher Perez

Ms. Brown’s practice focuses on individuals and organizations who are involved in criminal tax investigations,...  |  Read More

Kalinski, Jonathan
Jonathan Kalinski

Principal
Hochman Salkin Toscher Perez

Mr. Kalinski specializes in both civil and criminal tax controversies as well as sensitive tax matters including...  |  Read More

Toscher, Steven
Steven (Steve) Toscher

Managing Principal
Hochman Salkin Toscher Perez

Mr. Toscher has been representing clients for more than 35 years before the Internal Revenue Service, the Tax Divisions...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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