U.S. Supreme Court Declines to Hear 280E Challenge Over Late Paperwork

The U.S. Supreme Court has declined to hear an appeal case by California cannabis companies that sought to challenge their tax bills after filing their petitions with the U.S. Tax Court one day after the deadline, Law360 reports. Organic Cannabis Foundation LLC and Northern California Small Business Assistants Inc are fighting a $1.9 million tax bill — the result of filing under Section 280E, which prohibits tax deductions for companies trafficking in a controlled substance.

Cannabis companies throughout the U.S. must file under 280E because cannabis remains federally illegal.

The companies – both owned by Dona Ruth Frank – argued that under the precedent set by a Supreme Court decision in 2015, statutory deadlines are presumptively non-jurisdictional and therefore subject to equitable tolling. The companies’ case challenged the constitutionality of the 280E provisions, the report says.

The Ninth Circuit had ruled in June that the Tax Court was correct in dismissing the case based on the lack of jurisdiction.

In a separate case, the Tax Court ruled in February that San Jose Wellness, a subsidiary of Harborside, was liable for $4.2 million in taxes because federal law prohibits it from claiming depreciation and charitable contribution deductions due to 280E. In that case, Judge Emin Toro said that the “requirements of Section 280E are clear.”

Last month, the U.S. Circuit Court of Appeals rejected the 280E appeal from Oakland-based Patients Mutual Assistance Collective Corp – or Harborside Health Center – ruling that federal cannabis prohibition prevents legal cannabusiness from excluding or deducting taxable income as business expenses.

Last year, the Supreme Court declined to hear the case challenging the constitutionality of federal cannabis prohibition and the Drug Enforcement Agency’s Schedule I classification.