Separate ancillary services (consulting, IP, real estate, branding) into non-plant-touching entity — full deductions restored.
CHAMP v. Commissioner (2007) held that §280E only applies to the trafficking activity; separate trade/businesses within one entity or in a sibling entity get full deductions. Structure: Cannabis LicensedCo (§280E-limited, plant-touching only) + Non-Plant Touching SisterCo (consulting, real estate, IP licensing, back-office, branding, technology) that contracts with LicensedCo at arms-length. Full §162 deductions in SisterCo. Requires bona fide separate operations, arms-length pricing, and defensible allocation.
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Cannabis businesses <$29M avg receipts elect §471(c) to capitalize most operating costs into COGS, bypassing §280E disallowance.
S-corp/LLC cannabis operators pay 37% on §280E-inflated income — C-corp caps federal rate at 21% flat.
Owner-operator's real estate LLC leases to licensed cannabis co — rent is fully deductible to CannCo, tax-favored to Holdco.
100% ESOP-owned S-corp cannabis operator pays ZERO federal tax — ESOP is tax-exempt shareholder.