No longer applying Section 280E of the Internal Revenue Code to the legal cannabis industry would be a big benefit to companies and investors, right? Yes, but not in the way most investors expect.
Section 280E prohibits the use of standard business deductions by any company that traffics in federally controlled substances.
If 280E no longer applies, many investors expect tax savings would directly flow into net income, and we have seen some simplistic analyses that point to 50% to 120% increases in earnings.
But we think much of the tax savings will be reinvested into the business instead, because a tax cut is just a low-cost source of capital and the nascent legal cannabis industry still needs to invest billions to build out the entire supply chain.
To find out more, click on https://mjbizdaily.com/how-will-cannabis-stocks-be-impacted-if-section-280e-is-scrapped/