Work

An Exploration of the Cannabusiness in Michigan and the Influence of Internal Revenue Code (IRC) 26 U.S. Code § 280E

Year: 2025

Type: article

Abstract: Michigan cannabusiness owners face a number of industry-specific limitations and difficulties despite Michigan’s legalization of recreational adult-use marijuana in 2018. Michigan marijuana related business (MRB) owners battle repercussions resulting from the federally enacted Controlled Substances Act (CSA). Cannabis is outlawed federally, thereby making participation in the industry illegal and susceptible to federal prosecution. The CSA led to the creation of Internal Revenue Code (IRC) Section 280E; a legislation preventing MRBs from deducting all business expenses. IRC Section 280E negatively affects cannabusinesses by disallowing them from using their net income in computing their business tax liability. Cannabis’s designation as a Schedule I illicit substance in the CSA also prevents cannabusinesses from seeking sufficient access to business financing through debt and equity. Despite Michigan’s cannabis industry spawning healthy revenues, the impediment imposed by IRC Section 280E leaves all U.S. MRBs artificially stunted. Cannabis as a product is discussed, as well as its history in the U.S. and in Michigan. Relevant literature and proposed solutions for the U.S. cannabis industry are evaluated.

Source: Small Business Institute Journal

DOI: 10.53703/001c.138362

Authors: Haileigh Hart, Stacy Boyer-Davis, Maria Arakelian

Institution: Northern Michigan University

Language: English

Topic: Corporate Taxation and Avoidance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: hybrid

OpenAlex ID: W4412451791