S 471119th CongressIn Committee

No Deductions for Marijuana Businesses Act

Introduced: Feb 6, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The No Deductions for Marijuana Businesses Act would codify and extend the federal tax rule known as Section 280E. It would bar (a) any deduction or credit for amounts paid or incurred in operating a trade or business that traffics marijuana or Schedule I/II controlled substances, and (b) apply this prohibition whether the activity is illegal under federal law or under the state law where the business operates. In short, it maintains the current practice of denying federal tax benefits to marijuana- and other controlled-substance–trafficking businesses. The provision takes effect for amounts paid or incurred after the law’s enactment and applies to taxable years ending after that date.

Key Points

1No deduction or credit for marijuana or Schedule I/II trafficking: The bill amends IRC 280E to disallow any deduction or tax credit for amounts paid or incurred in carrying on a trade or business that traffics marijuana or other Schedule I/II substances.
2Definitions used: Marijuana is defined as in the Controlled Substances Act (the CSA), and the bill also covers other controlled substances listed in Schedule I and II.
3Federal or state legality: The prohibition applies if the activity is prohibited by either federal law or the state law where the business operates.
4Effective date: The restriction applies to amounts paid or incurred after enactment in taxable years ending after that date.
5Alignment with existing law: This is a formal amendment to Section 280E to maintain and clarify the ban on deductions/credits for marijuana-related (and other controlled-substance) businesses.

Impact Areas

Primary group/area affected: Marijuana- and other controlled-substance–trafficking businesses operating in any state, along with their tax filings and the tax professionals who service them.Secondary group/area affected: Federal and state governments (tax revenue effects), the broader cannabis industry, and financial/compliance professionals who advise such businesses.Additional impacts: Higher effective tax rates for these businesses due to lack of deduction/credit eligibility; increased compliance considerations for tax professionals; potential shifts in business structuring or state-by-state tax planning to accommodate the federal prohibition.

Generated by gpt-5-nano on Nov 19, 2025