This article referenced in this post was originally published in Volume 99, Issue 11, of CCH’s TaxesThe Tax Magazine (November 2021).

In the November 2021 edition of International Tax Watch in TAXES – The Tax Magazine, Tom Firestone, Scott Frewing, Ethan Kroll, Erika Van Horne, Stewart Lipeles, and Julia Skubis Weber explore the U.S. international tax implications of section 280E, concluding that section 280E should not disallow deductions for expenses U.S. persons incur in connection with:

  • maintaining cannabis IP in, and licensing that IP from, the United States;
  • engaging in cannabis R&D in the United States; and
  • assisting with and overseeing from the United States non-U.S. operations that manufacture, market, distribute, dispense, and sell cannabis products outside the United States, where it is legal to do so.

They also determine that section 280E should not disallow deductions against tested or subpart F income for expenses CFCs incur in connection with manufacturing, marketing, distributing, dispensing, and selling cannabis products outside the United States, where it is legal to do so.  In short, the authors conclude that section 280E should not deter foreign multinationals that seek to commercialize cannabis legally from establishing robust operations in the United States, where there is a wealth of talent in the cannabis space.

Read their full analysis of the issue in Who’s Afraid of Code Sec. 280E?, International Tax Watch (Nov. 2021).

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Tom Firestone is located in Baker McKenzie's Washington D.C. office and Co-chair of the firm's North American Government Enforcement practice.

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Scott Frewing is a tax partner in Baker McKenzie's Palo Alto office.

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Ethan Kroll is a partner in the Los Angeles office and a member of the Firm's Tax Practice Group. He co-authors a regular column on international tax developments in TAXES – The Tax Magazine, contributes regularly to the Tax Management International Journal's Leading Practitioner Commentary, and speaks frequently on international tax issues. Previously, he was a principal at a Big Four accounting firm.

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Erika is a litigation associate located in Baker McKenzie's New York office.

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Mr. Lipeles practices in the area of corporate tax law, with an emphasis on international tax planning. He joined the firm in 1996 and became a partner in 1999. From 1993 to 1996, Mr. Lipeles was an associate at the law firm of Jenner & Block. From 1994 to 1996, he was also an Adjunct Professor at IIT/Chicago Kent College of Law, where he taught classes on International Taxation and other subjects. Mr. Lipeles served as a law clerk to the Honorable E. Grady Jolly of the U.S. Court of Appeals, Fifth Circuit in 1992 and 1993.

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Julia Skubis Weber is a partner in Baker McKenzie’s Global Tax Practice Group in Chicago. She has been advising US, non-US and multinational corporate and pass-through clients on federal income tax planning matters since 2005.