The United States Supreme Court decided yet again not to intervene in a federal income tax case. It is not as surprising as we make it sound. The Supreme Court actually declines to hear the vast majority of cases presented to it.
Each year it receives approximately 10,000 petitions requesting a writ of certiorari but accepts only 100 or so of them. It is harder to get heard by SCOTUS than to get into an Ivy League college. Unless the subject matter or petitioner is high profile, the general public rarely hears about cases SCOTUS declines to take.
This time the issue was enforcement of the tax code section that disallows certain tax deductions to businesses that sell federally controlled substances. While the sale of marijuana is legal in many states, it’s still a violation of federal law.
Over the past decade or so, federal enforcement of marijuana laws has been more or less absent. Since 2015, Congress has prohibited the Department of Justice from spending money prosecuting individuals who comply with state law — essentially making sure it doesn’t prevent states from legalizing marijuana. You can understand why state-legal marijuana businesses would think they should be entitled to take the same tax deductions as any other retailers and why.
Two cases were presented to the Court. They denied certiorari to one but sent the other back for a final discussion in conference. Ultimately, they rejected the chance to review the Internal Revenue Service’s (IRS) enforcement action in the second case as well. You may ask why is this important if the Supreme Court didn’t do anything and the lower courts have allowed the IRS to continue auditing marijuana dispensaries and disallowing deductions?
What is unusual about this particular case is that the most conservative Justice of the Supreme Court, Clarence Thomas, wrote a five-page statement denying certiorari and used that statement to suggest that the federal ban “on intrastate use or cultivation of marijuana may no longer be necessary or proper.” In the statement, he discusses not only the unequal treatment under the tax code but also federal banking regulations and even firearm laws. The statement, which can be read here, is quite interesting. No current action needs to be taken, but the times they are a changin’.