Split Tax Court Backs IRS Denying Compromise With Marijuana Shop

The IRS properly applied a Tax Code provision forbidding tax breaks when it rejected a marijuana business’s attempt to settle debts, a split Tax Court ruled.

The court upheld the rejection of an offer-in-compromise from cannabis business Mission Organic Center Inc. based on IRC Section 280E. That provision blocks tax credits and deductions from businesses that traffic in designated controlled substances, so it disallows many of the expenses Mission Organic Center claimed on its tax returns.

The complicated determination resulted in seven opinions—two concurring with the 16-judge majority, as well as three dissenting judges, who each wrote an opinion. ...