This section contains the nature of the case and procedural background.

P is a California corporation solely owned by Dona Ruth Frank. P and Ms. Frank jointly own additional California entities. On September 20, 2016, D issued a notice of deficiency for its 2012 tax year determining adjustments related to income and expenses from passthrough entities. D determined that P's business consists of trafficking in marijuana, a controlled substance within the meaning of schedule I or II of the controlled substances Act. D held that P was subject to the limitations of IRC 280E, which disallows all deductions or credits paid or incurred during the taxable year in carrying on a trade or business that consists of trafficking in controlled a substance. P operates a medical marijuana dispensary and its operations are legal under California State law. P alleges that section 280E: (1) imposes a gross receipts tax as a penalty in violation of the Eighth Amendment to the Constitution; (2) eliminates only ordinary and necessary business deductions under section 162 and does not apply to other distinct sections of the Code; and (3) does not apply to marijuana businesses legally operated under State law.

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