Illinois Businesses and Cannabis—Tax Revenue and Legal Challenge

marijuana industryAcross the country, the commercial marijuana industry continues to grow, providing robust tax revenue and the opportunity for tax fraud and political intrigue.


In January 2020, Illinois welcomed a new industry—the legal sale of recreational marijuana, or weed. The conservative think-tank Illinois Policy reported dispensaries cleared $10 million in retail sales during the first week.


Since then, sales continue on an upward arc with $563 million in tax revenue reported by December 2021. Despite concerns that high taxes and fees would push the weed business back into the black market, that does not appear to have occurred.


Instead, the state has profited handsomely from the tax revenue. According to the Sun-Times, about $350 million of those taxes and fees go the Cannabis Regulation Fund that is aimed at social equity. In addition to general revenue funding and reinvestment (R3) programs, here is where some of the money goes:

  • Substance abuse prevention and mental health issues
  • Budget stabilization
  • Regulation of cannabis
  • Public health campaigns


The Restore, Reinvest, and Renew program (R3) provides civil legal aid, economic development assistance, violence prevention, and re-entry services. Other funds support purchase and supply of Narcan, an opioid-reversal spray to at-risk populations. 


With business booming and millions to be made, Illinois conducted a lottery of cannabis retail licenses in August, after a delay of the better part of a year. At issue were 185 new licenses available to applicants who paid the $5,000 application fee. Purportedly, bonus points were given to businesses located in challenged areas or who employed marginalized workers such as those struggling after conviction on drug or other crimes.  


The result of the lottery was not quite as expected, depending on your view. Critics claim a majority of the licenses went to multi-state businesses, white and wealthy investors, or former government officials seeking to cash in on the cannabis craze. Bridget Degnen, representing AmeriCanna Dream, was awarded a license. Ms. Degnen is a Cook County Commissioner and a former deputy director of the state medical cannabis program.


By October of 2021, the matter had moved to the courts and a consolidation of lawsuits filed against the state lottery by participants. The full fate of the 185 licenses has yet to be decided as the state continues to review and revise the lottery process for this very lucrative industry. 


Knowledgeable tax attorneys help you with tax controversy and IRS criminal investigations

With offices in Cleveland and Chicago, the legal team at Robert J. Fedor, Esq., LLC delivers experienced legal representation to clients locally, throughout the U.S., and abroad on matters of business compliance, and IRS civil or criminal tax audits. When you have questions about tax issues, call us at 800-579-0997 or contact us. 


Contact Us