Medical Marijuana Business Deduction Ban Upheld by Tax Court (2)

A tax code provision blocking marijuana companies from getting federal tax deductions is constitutional, the U.S. Tax Court ruled Oct. 23.

The case arose after the IRS billed Northern California Small Business Assistants Inc.—a California medical marijuana company—for $1.5 million in unpaid taxes and an accuracy-related penalty for the 2012 tax year.

The agency had disallowed the company’s tax deductions under tax code Section 280E, which says that a business that consists of trafficking in a Schedule I or II controlled substance can’t receive any tax deductions.

Many cannabis companies that are legal under state law are ...