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Opinion: Cannabis businesses could recoup millions on exit, thanks to ‘280E asset’

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A combination of tax methods could help cannabis companies reduce their tax burden under Section 280E of the federal tax code.

If recent case law is applied equitably, the cannabis industry could be sitting on millions of dollars in unclaimed federal tax refunds.

The first, a method I call “the 280E asset,” is supported by very old case law and a recent federal claims court decision that barred the practice of deductions being recognized as basis.

Basis refers to a business owner’s investment in a business and that company’s investment in its assets.

For example, if a taxpayer buys an airplane for $1 million and then immediately sells it for $1.5 million, that’s a basis of $1 million and a gain of $500,000.

The 280E asset accepts that Section 280E prohibits the deduction of costs that cannot be recognized as cost of goods sold (COGS).

It also posits that 280E cannot permanently disallow the recognition of ordinary and necessary business expenses.

Under this theory, 280E expenses cannot be deducted in the year they are incurred, but they must be allowed as basis in the business or its assets and recognized on exit (when the business is sold) or when permitted under the taxpayer’s accounting method (more on this later).

U.S. tax law provides that if costs such as depreciation are deducted during the life of a business, you can’t recoup them (again) on exit.

Case law at work

In CBS Corp. & Subsidiaries v. U.S., the federal claims court held that disallowed expenses that were not personal in nature (just like 280E expenses) had to be recognized and allowed as basis and thus reduce gain on exit.

The costs at issue were depreciation of an airplane that was leased to a foreign commercial airline.

At the time, U.S. law provided that 30% of foreign source income was exempt from tax and the same corresponding 30% of deductions were disallowed (just like 280E).

CBS Corp. recognized the law and depreciated only 70% of the airplane.

The issue in that case was whether the taxpayer could reduce its gain on the sale of the airplane according to the 30% that was not depreciated during the life of the business.

The IRS argued in court that the airplane had to be treated as two types of property – one for which deductions were allowed and another for which they were never allowed (the same treatment is applied to cannabis business under 280E).

The court did not agree and instead held that disallowed deductions for ordinary and necessary business expenses resulted in “erroneous inflated gains, warranting the claimed tax refund.”

The marijuana industry is well acquainted with the erroneous inflated gains created by 280E, but it hasn’t seen many refunds.

If the CBS case holds true for the industry, it means millions in federal tax refunds should be available to companies and owners on exit.

Prepare for opposition

In claiming refunds for 280E costs, cannabis companies will likely be met by an opposing argument: Because the IRS can permanently disallow other expenses (bribes, personal expenses, meals, etc.), it can permanently disallow all deductions under 280E.

In the CBS case, the IRS made the same argument and pointed to past situations in which airplanes with personal and business use were permanently denied deductions for the personal-use portion.

Here, the court distinguished such cases as “inapposite” because they involved disallowed personal expenses.

But because Section 280E costs are ordinary and necessary business expenses, the IRS should recognize that they cannot be permanently disallowed.

The court’s decision in the CBS case is far worse for the government than 280E.

In that case, the taxpayer was allowed all of its deductions and 30% of its income was excluded from tax (resulting in a windfall).

Cannabis companies, meanwhile, pay tax on their 280E costs and, under the CBS case, they still must carry them until exit.

The good news is that under Section 471(c) of the 2017 Tax Cuts and Jobs Act, small businesses might not have to wait until exit any longer.

Section 471(c) is a statutory law and accounting method under which the tax rules that limit COGS do not apply.

Instead, the taxpayer can report its COGS according to its books and records.

Like the 280E asset theory, Section 471(c) should work because 280E merely disallows the “deduction” of an expense but does not permanently delete it.

If the law provides an accounting method that allows a deductible expense to be accounted for as COGS, 280E should not disallow it.

Because 471(c) allows the taxpayer, rather than the IRS, to determine its COGS, it might be the method that allows recovery of costs that cannot be deducted under 280E.

These are complicated concepts that require the assistance of a qualified tax professional.

That said, it appears that cannabis companies are more profitable than was previously thought because, under the CBS case, current and historic 280E costs should be recoverable on exit or as a component of COGS if permitted under the taxpayer’s accounting method.

Source: https://mjbizdaily.com/cannabis-businesses-could-recoup-millions-from-280e-asset/

Business

EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

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A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

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AI & Technology

Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations

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Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).

The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.

Trial Push Despite Multi-Million Euro Settlement

The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.

Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.

A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.

Allegations of VAT Evasion Through Marketplace Sellers

At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.

Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.

Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.

Italian Government Named as Affected Party

In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.

Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.

Multiple Investigations Add to Pressure

The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.

Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.

In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.

Amazon Denies Allegations

Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.

Broader Impact on Europe’s Digital Economy

If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.

With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.

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Aviation

IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?

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Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.

Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.

Root Cause: IndiGo’s Market Monopoly

The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.

This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.

Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.

Government Intervention and Regulatory Weakness

The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.

Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.

The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.

If Telecom Giants Fail: A National Paralysis

The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?

If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.

In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.

E-commerce Monopoly: Another Fragile Ecosystem

The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.

Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.

A Wake-Up Call for Regulators

The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.

As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.

Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.

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