States that have income taxes (not all do) and that legalize marijuana face an arcane income tax issue: 280E conformity. Simply put, should marijuana businesses, on their state income tax returns, be able to deduct all expenses? Federal section 280E, discussed a good bit at www.newrevenue.org, allows businesses in violation of federal narcotics laws to deduct only cost of goods sold – and not, for instance, selling expenses. Many state income tax laws track — conform to — the federal tax Code. That’s why, when you fill out a state tax return, much of the data you need to enter peels off the federal return.
In Oregon, before the 2014 marijuana initiative, state tax law conformed to 280E — it followed the federal tax Code. Then Measure 91 repealed the state’s version of 280E across the board. Now critics are saying repeal should apply only to marijuana – not to all federally illegal drugs, such as meth and heroin. Good catch, I suppose, so long as Oregon voters are mad at other drugs.
In California, there is 280E conformity for individuals but not for corporations. (Huh?) Continue reading “280E Conformity — with CA update”