Source: http://news.cchgroup.com/2019/12/23/8th-amendment-lets-irs-deny-deductions-for-legal-marijuana-business-some-judges-disagree/news/tax-headlines/
Timestamp: 2020-06-06 13:53:23
Document Index: 595377818

Matched Legal Cases: ['§280', '§280', '§280', '§280', '§280', '§280', '§280', '§280']

8th Amendment Lets IRS Deny Deductions for Legal Marijuana Business – But Some Judges Disagree - Tax & Accounting Blog
8th Amendment Lets IRS Deny Deductions for Legal Marijuana Business – But Some Judges Disagree
A fractured Tax Court rejected another constitutional challenge to the law that bars expense deductions for legal marijuana businesses. However, two judges embraced the taxpayer’s claim that IRC §280E could violate the 8th Amendment’s prohibition against excessive fines.
Tax Court Finds §280E Constitutional, Again
Majority Says No Fine = No Constitutional Violation
The majority held that 280E does not violate the 8th Amendment because it does not impose any fine at all, much less an excessive one. The court acknowledged that a penalty may be civil as well as criminal, and a financial burden may be a fine even if it is called something else. However, “disallowing a deduction from gross income is not a punishment.”
These judges recognized that other courts had held that §280E is not a penalty. However, they traced these precedents back to a finding that that §280E was a tax, rather than a penalty, for purposes of the Anti-Injunction Act. This narrow question of statutory construction was a very different analysis than the one that should be used for 8th Amendment issues.
And §280E Taxes More than Income
One of the dissenting judges also argued that the “deductions are a matter of legislative grace” rule does not apply to §280E. The judge reasoned as follows:
What’s Next for §280E Challenges?
Even §280E imposes a fine, all of the judges agreed that the taxpayer did not show that: