by Valerie Taylor Vice President (National Cannabis Practice Leader) The Liberty Company Insurance Brokers
Cannabis is a legal product that has been legalized in more than half of the states. Despite this progress, cannabis companies still face a major hurdle: Sections 280E and of the Internal Revenue Code . This provision places a heavy burden on cannabis companies, as it limits their ability to deduct basic expenses such as rent, utilities and employee salaries. This results in a higher tax rate and lower profitability for cannabis businesses, which puts them at a competitive disadvantage.
In the 1980s, section 280E was created to stop drug dealers from deducting business expenses on their tax return. The provision was initially aimed at drug dealers who were illegal. Section 280E is a major obstacle for cannabis businesses. While cannabis is legal in many states for recreational or medical use, it is still a Schedule I substance at the federal level. Cannabis businesses still face the same tax limitations as drug dealers.
Section 280E has a significant impact on cannabis businesses. Cannabis businesses will face increased tax burdens and lower profitability if they are unable to deduct their basic expenses. It is difficult for cannabis businesses to grow and reinvest their profits. The provision also makes it difficult for cannabis businesses, due to the regulatory climate and industry’s Schedule I status, to get financing.
Insurance plays an important role in the cannabis industry. Insurance professionals can help cannabis businesses protect assets, minimize risks, and navigate a complex regulatory environment. Insurance providers face similar challenges due to the cannabis industry’s regulatory environment and its status as a Schedule I substance. Some insurance companies, for example, are reluctant to cover cannabis businesses because they fear federal prosecution.
There are still insurance providers who specialize in cannabis and provide tailored solutions for cannabis businesses. Working with these providers allows cannabis businesses to protect their assets, minimize their risks and demonstrate to investors and lenders how they manage their risk.
There are also other ways that policymakers can support the cannabis sector. One of the most important steps is to revise Section 280E. By allowing cannabis companies to deduct more on their tax returns policymakers can level the playing fields and create a more fair regulatory environment for the sector. Cannabis businesses would be able to invest in their business, expand their business, and create new jobs.
One could say 280E is as important or even more important than changing the tax code. It is a crucial step for policymakers to take in order to remove cannabis as a Schedule I drug. Cannabis’ current status as a Schedule I substance is outdated, based on old stereotypes. This also contributes to a huge roadblock that could destroy many legal businesses, which helps the illicit markets thrive. Researchers would be able to better study cannabis and gain a deeper understanding of the medical benefits of it and its potential risks if it was removed from Schedule I. This would allow cannabis businesses to be more flexible and receive financing from traditional lenders.
To ensure the success of this industry, it is crucial to create a regulatory environment that supports cannabis.
The cannabis industry will continue to grow with the support of policymakers and insurance professionals. They can also provide tailored solutions. To support this vital industry, it is important to revise Section 280E. This will remove cannabis from Schedule I drugs.
Valerie Taylor, producer, vice president and national cannabis practice leader, The Liberty Company Insurance Brokers
Valerie has more than 16 years experience in the industry. She is a specialist in cannabis, real-estate, and community association insurance. McDermott-Costa Insurance Brokers, AmWINS Group, Inc., Commercial Coverage Ins. are among the companies that Valerie has worked for. Valerie loves helping clients understand the importance of insuring their businesses. She has worked for Colemont Insurance Brokers and Agency. Valerie is also a member of the National Cannabis Bar Association, NCIA, and the Richmond Grows Seed Lending Library, which helps people learn how to grow and save their own vegetables. Valerie was awarded the 2021 and 2022 CREW East Bay Connections Award in 2021. She also received the Elevate 2021 industry impact award.
Valerie’s passion and drive for helping others has led her to revisit her roots in the plant-medicine industry. She uses her unique perspective of growing up around cultivators and vendors to validate her clients’ business needs. Valerie aims to change the way insurance and cannabis have partnered to give back to her community. Valerie is a trusted advisor to over 70 cannabis customers. She has a solid insurance background, and a deep understanding of the cannabis industry.
Valerie Taylor (Vice President, National Cannabis Practice Leader, The Liberty Company Insurance Brokers) can provide you with more information about Liberty’s National Cannabis Practice Group.
The article Member Blog: What does 280E mean for the Cannabis insurance landscape? The National Cannabis Industry Association published the first post Member Blog: What Does 280E Mean for the Cannabis Insurance Landscape?
