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Justice Department reminds canna-businesses they can’t file bankruptcy

Posted on Thursday, 7th December 2017 @ 01:53 AM by Text Size A | A | A

One of the most difficult challenges that U.S. canna-businesses currently face is that the federal tax code that prevents them from claiming credits and deductions on their professional income, even if legal on a state level — leaving cannabis companies with federal tax rates as high as 80 percent. If the lack of regulatory equality with other legal businesses drives one of these canna-startups to bankruptcy, they will face yet another hurdle, as they cannot access the same bankruptcy protections that any other profit-making enterprises can avail themselves of, writes Forbes.

Two Department of Justice officials recently penned an article in the American Bankruptcy Institute Journal to serve as an unfriendly reminder to the cannabis industry that the country’s bankruptcy system cannot assist canna-businesses in liquidating or restructuring their assets. “Marijuana continues to be regulated by Congress as a dangerous drug, and as the Supreme Court has recognized, the federal prohibition of marijuana takes precedence over state laws to the contrary,” wrote Clifford J. White III, director of the Executive Office for U.S. Trustees (USTP) and John Sheahan, a trial attorney for the agency, Forbes reports. This is consistent with an analysis published in the New York Law Journal earlier this year, which concluded that state-legal marijuana enterprises effectively can’t file bankruptcy.

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