Harvesting Highs but No Relief for the Lows: The Inconsistent Treatment of Marijuana Businesses by Bankruptcy and Tax Law

Despite marijuana’s varying levels of legalization in thirty-three states, the U.S. federal government still regards marijuana cultivation and distribution as federal crimes, leading bankruptcy courts to deny marijuana businesses the benefits of bankruptcy for fear of aiding the illegal activities. Courts have historically prioritized protecting the bankruptcy trustee from federal prosecution over allowing creditors and debtors access to the intended benefits of the Bankruptcy Code. Court interpretations of the Controlled Substances Act and what constitutes illegal activity continue derailing marijuana businesses’ attempts at repaying creditors through bankruptcy. While Congress remains stubborn in recognizing marijuana businesses as legitimate sources of income for bankruptcy purposes, it has not hesitated in recognizing that very same income as taxable under the Internal Revenue Code. This Comment argues that courts should change their approaches to bankruptcy for marijuana businesses and ultimately proposes a hybrid solution involving bankruptcy and tax laws as avenues for relief for the debtor, creditor, and trustee in marijuana bankruptcy cases