WHY IS THIS HAPPENING: The big question hanging over the IRS' message: Exactly which companies are the target for this statement? It’s not as if companies should expect to get retroactive tax relief after marijuana is rescheduled, as industry insiders told Morning Tax. Instead, their ability to claim normal business deductions would almost certainly be for the future. However, large cannabis companies have been seeking refunds already, arguing that Section 280E doesn’t apply to them even before the scheduling change goes into effect, according to tax experts who work with pot businesses. For instance, Trulieve, a Florida-based cannabis retailer that also operates in other states, announced earlier this year that it had received more than $100 million in tax refunds after challenging whether it was limited by Section 280E. The company had announced last year — well before the administration revealed its plans for a scheduling change — that it was seeking more than $150 million in retroactive relief from both the federal and state governments. Trulieve’s executives haven’t publicly discussed what their argument is to the IRS, suggesting that doing so could hurt them in any potential court case with the tax collector. But multiple close watchers of the situation believe Trulieve is claiming that Section 280E doesn’t apply to it because the business is based on intrastate commerce — not the interstate commerce that Congress can regulate. Current Supreme Court precedent has rejected that idea, as John Fraser, the Michigan team leader of Dykema’s cannabis practice told Morning Tax — though Justice Clarence Thomas has signaled he thinks that precedent should be overruled. Fraser believes the IRS's Friday statement was a shot across the bow to Trulieve and any companies that might make similar claims. (Other publicly-traded cannabis companies have also announced that they’ve sought refunds based on the idea that they’re eligible for regular business tax breaks.) “I imagine that the IRS has been inundated in claims copying Trulieve’s position,” Fraser said. “That’s why I think the IRS was so unequivocal. They’re trying to really discourage folks from riding Trulieve’s coattails.” Michael Harlow of CohnReznick said the companies that have sought refunds from the IRS are aware their claims ultimately might not be successful — but they likely believe their cases are in a stronger position now that marijuana is on the path to be rescheduled. “They’re taking a position that’s aggressive and forcing the IRS to either process or litigate,” Harlow said. DIGITAL RULES OF THE ROAD: The Treasury Department and the IRS rolled out a final set of rules covering cryptocurrency brokers Friday — and as Pro Tax’s Benjamin Guggenheim noted, they basically decided to hold off on answering the hardest questions for another day. Still, the new rules mean that some of the industry’s biggest names, like Binance and Coinbase, now have a better understanding of how they should report digital asset sales for tax purposes. Treasury said that the IRS is working through the more complex issue of how to handle decentralized exchanges, and further guidance on that front will come later this year. Companies affected by Friday’s regulatory release gave a lukewarm response, applauding the administration for making the rules easier to navigate but also suggesting they didn’t go far enough. “While we appreciate the more limited nature of these regulations, we believe the rules should be implemented on par with reporting for traditional financial brokers,” Coinbase’s Lawrence Zlatkin said on X, noting that the company was particularly concerned about an “absence of a de minimis rule.” Also worth mentioning: Democrats, like Sen. Elizabeth Warren (D-Mass.) in particular, have not been happy with Treasury's and IRS' pace on finalizing these crypto reporting rules. But at least some liberal-leaning groups seemed fine with the decision to hold off, at least for now, on the rules for decentralized exchanges. “It’s important that Treasury and the IRS get it right when crafting still-pending final rules addressing decentralized exchanges to ensure they meet the requirements of the law,” said Chye-Ching Huang of the Tax Law Center at NYU Law. “Otherwise, there will be an easy path for unscrupulous actors to avoid the reporting regime."
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