Controlled Substances Act Justifies Tax Penalties for Dispensary

A California medical cannabis dispensary can’t deduct donations and business expenses from its federal taxes because its business falls under the Controlled Substances Act, the US Tax Court said Monday.

IRC Section 280E prohibits businesses that engage in trafficking controlled substances from claiming tax credits, meaning the dispensary can’t claim them for 2016, the court said. Even though cannabis is legal in California, it is still considered an illegal controlled substance under federal law, the Tax Court said. The company reported its 2016 income was $1.04 million with a $354,000 tax liability, but the IRS determined the dispenary’s taxable income ...