The Internal Revenue Service (IRS) would like to get paid—and it’d help if the marijuana industry had access to banks like companies in other legal markets, an official with the federal department said. She also talked about unique issues related to federal tax deductions for cannabis businesses. At an event hosted by UCLA’s Annual Tax Controversy Institute on Thursday, IRS’s Cassidy Collins talked about the “special type of collection challenge” that the agency faces when it comes to working with cannabis businesses while the product remains federally illegal. While IRS isn’t taking a stand on federal marijuana policy, Collins said that the status quo leaves many cannabis businesses operating on a cash-only basis, creating complications for the agency, in part by making it harder for banks to “pay us.” “The reason why [the marijuana industry is] cash-intensive is twofold,” she said. “Number one, a lot of customers don’t want a paper trail showing that they’re buying marijuana, and number two, the hesitancy of banks to allow marijuana businesses to even bank with them.” Of course, the reason why many financial institutions remain hesitant to take on cannabis companies as clients is that the plant is a strictly controlled substance under federal law. “There’s been a number of legislative bills that have been introduced—and I am definitely not expressing any opinion personally or on behalf of the IRS about any pending or proposed legislation,” Collins, who is a senior counsel in the IRS Office of Chief Counsel, said. “But it is interesting to note that, if the law changed so that the marijuana businesses could have banks, that would make the IRS’s job to collect [taxes] a lot easier. As part of the collection, we want the money. That’s our end goal there.” A major part of what makes cannabis businesses unique is that they don’t qualify for traditional tax credits under an IRS code known as 280E. That policy “prohibits them from claiming deductions for business expenses because they’re technically being involved in drug trafficking,” Collins explained at the event, from which small excerpts of her comments were reported by Bloomberg.
Kyle Jaeger, Marijuana Moment, 10/22/2021 16:39:00