CCA 2024-30: IRS Confirms §199A QBI Deduction Unavailable to Cannabis Pass-Throughs

## Overview Chief Counsel Advisory 2024-30 addresses whether cannabis operators structured as S corporations, partnerships, or sole proprietorships can claim the IRC §199A qualified business income (QBI) deduction — the 20% pass-through deduction available to non-corporate taxpayers on qualified business income. ## IRS Position The IRS concludes that cannabis operators cannot claim the §199A QBI deduction. The Chief Counsel Advisory reasons that: (1) §199A requires qualified business income, which is business income net of allowable deductions; (2) §280E disallows all deductions (except COGS) for cannabis businesses; and (3) because the §199A deduction itself is a deduction allowed for purposes of computing taxable income, it too is subject to §280E disallowance. ## Impact This is adverse for pass-through cannabis operators who hoped to offset some §280E burden through the §199A deduction. For a $5M income cannabis S-corp, the §199A deduction would have provided a $1M tax benefit — now confirmed unavailable.