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Opportunity Zone Tax Breaks for Weed Businesses? Mnuchin Says No

May 15, 2019, 4:02 PM

Treasury Secretary Steven Mnuchin advised against leveraging the 2017 tax law’s opportunity zone tax incentives to fund a marijuana business, even those that are legal at the state level.

Mnuchin told a Senate appropriations panel that such investments don’t line up with the intent of the capital gains tax breaks, which are for investors who fund development in designated census tracts, most of which are low-income. Sen. James Lankford (R-Okla.) raised the issue at the hearing May 15. Lankford said he didn’t believe such businesses should qualify.

  • Tax code Section 1400Z-2, which outlines eligibility and guardrails for the tax breaks, refers to a list of what tax professionals often call “sin businesses” under Section 144(c)(6)(B). The list includes hot tub and tanning facilities, massage parlors, golf courses, country clubs, liquor stores, and gambling and racetrack venues—but not cannabis companies.
  • Tax professionals have disputed for months whether a cannabis business would be eligible, with some pointing to the fact that marijuana remains illegal at the federal level, and others citing its absence from the “sin business” list. Still others have expressed concerns that dispensaries could fall into the liquor store category.
  • State-legal cannabis enterprises are generally barred from taking ordinary business deductions—and can only reduce their taxable income by inventory costs known as cost of goods sold—under Section 280E.
  • Mnuchin said it is up to lawmakers to resolve the conflict between state and federal treatment of marijuana.

To contact the reporters on this story: Lydia O'Neal in Washington at; Robert Lee in Washington at

To contact the editors responsible for this story: Patrick Ambrosio at; Colleen Murphy at

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