Nearly 75% of cannabis companies are making losses and many in the industry cite a tax code regulation as the reason for this.

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As long as marijuana is subject to the most restrictive part of the Controlled Substances Act, cannabis companies are prohibited from deducting normal business expenses – such as rent or payroll – from federal taxes.

That could change if marijuana is moved from Schedule I to Schedule III of the law, as the Biden administration has proposed. In the meantime, however, 22 states plus Washington, D.C., have allowed medical or recreational cannabis businesses to take some deductions on their state tax returns by decoupling their tax laws from Section 280E of the Internal Revenue Code, which mandates the federal ban. Pennsylvania was the latest state to make this change with a state budget passed last month.

In this episode of Talking Tax, Bloomberg tax reporters Angélica Serrano-Román and Owen Racer discuss their recent investigation into how States are increasingly decoupling their tax of 280E at the state level.

Do you have feedback on this episode of Talking Tax? Call us and leave a voicemail at 703-341-3690.