Congressional Research Service Questions Constitutionality of Cannabis Tax Section 280E

Key Takeaway

A Congressional Research Service report found that whether Section 280E violates the Eighth Amendment's Excessive Fines Clause 'is a matter of debate' among legal scholars. The report noted that while the US Tax Court ruled in 2019 that 280E does not violate the Excessive Fines Clause, other courts have not had occasion to rule on the question, and the Harborside case left open several constitutional arguments that have not been fully litigated. The CRS analysis arrives amid multiple pending Tax Court challenges to 280E by cannabis operators. For cannabis businesses and their CPAs, the report is significant because it signals that congressional staff take the constitutional challenge seriously, which could influence any legislative response to rescheduling and 280E repeal efforts.