Did the Supreme Court Just Kill Rescheduling?

Buckle up because the Supreme Court just dropped a bombshell that could have your cannabis business plans going up in smoke if you were relying on rescheduling tax relief for 2024. Last week, the Supreme Court overturned something called the “Chevron doctrine”, a 40-year statute that is now calling a lot into question.

1. Rescheduling?

The ruling has potentially derailed the entire rescheduling process. While the May announcement was welcomed by most of the cannabis community, in spite of not actually legalizing the plant, last week’s Supreme Court decision may make the rescheduling efforts dead in the water. The decision essentially says that federal agencies lack the authority to interpret laws willy-nilly and that the courts play a significant role in both the law-making and interpretation process. 

What it means for you: Don’t count on any tax breaks from rescheduling anytime soon. Keep running your business as if 280E (that pesky tax rule that doesn’t let you deduct normal business expenses) is here to stay.

2. 280E: Still Your Least Favorite Number

To add insult to injury, the IRS also issued a memo last week “reminding” cannabis business owners that in spite of the rescheduling announcement and the pending regulations review by the DEA, 280E still very much applies to cannabis businesses. While aggressive tax attorneys around the country have been touting various arguments, especially post-rescheduling announcement, none of them have succeeded in court. The blow of the Supreme Court decision now gives even more precedent to court decisions and will be the support the IRS needs to enforce the applicability of 280E.

What it means for you: Keep meticulous records, focus on maximizing your cost of goods sold, and maybe consider getting cozy with your accountant. The only legal way to minimize tax liability in this industry is meticulous and expert tax planning, supported by good documentation.

3. Regulators Playing It Safe

We could see shifts in compliance and regulatory changes coming from the various states and their regulatory bodies in light of the decision. Regulators now need to be aware that the courts ultimately have final say. If regulatory bodies are making rules and setting compliance standards that can be seen as too creative or ambiguous by the courts, it’s likely those rules will be struck down in any future court decisions.

What it means for you: Expect less wiggle room when it comes to interpreting regulations. When in doubt, play it safe, but consider discussing ambiguous regulations with your attorney.

4. Congress: Your New Best Friend?

With the courts taking a step back, Congress is now in the hot seat. If we want real change, especially on the tax front, we need those folks on Capitol Hill to actually, you know, do something. This is an absolutely critical moment for lobbyists and advocacy groups across the country to step up to the plate. Write letters to your representatives, hire a lobbyist in Washington, and collectively send testimonials on behalf of the industry in your state to make your voices heard that we want Congressional action to legalize cannabis and remove the unfair tax and banking laws.

What it means for you: Time to flex those civic muscles! Get involved with your local cannabis business association, write to your representatives, and make your voice heard.

5. Legal Challenges: The New Wild West

This ruling might open up some opportunities to challenge existing cannabis regulations. It’s like the legal equivalent of a door-buster sale – exciting, but potentially chaotic.

What it means for you: Keep your ear to the ground for any legal challenges that might benefit your business. But remember, what goes up must come down – these challenges could backfire too.

The Big Takeaway

We all know the cannabis industry is about as predictable as a first-time edible user, but this Supreme Court decision just added a whole new level of “whoa” to the mix. Your best bet? Stay flexible, keep your books clean, and don’t make legal and accounting decisions without professional advice. We want to see 280E go away as much as you do. Our tax planning strategies will be vastly more effective once our cannabis clients can be treated like every other business, however, in the meantime, it’s important to have clean books and record to allow you to make informed business decisions and continue to address high tax liabilities.

Christine Gervais

Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.

At Cultivate Consulting Group, we understand that you want to achieve lasting financial stability that leads to the legacy you envision for your company and family. The problem is traditional CPA firms are not known for proactive communication, which leads to uncertainty when it comes to your business’s tax efficiency and financial standing.
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