Schedule DFE: DFE Disallowed Federal Expenses for Marijuana Establishments (2025)
Arizona · Arizona DOR · Used for tax years 2025
Arizona Schedule DFE reports disallowed federal expenses for marijuana establishments, marijuana testing facilities, and certain dual licensees. It totals expenses such as wages, rent, interest, and depreciation for entry on the applicable Arizona tax return or shareholder statem
Who files this form
Complete the 2025 Arizona Schedule DFE only if you are licensed by the Arizona Department of Health Services (ADHS) as a Marijuana Establishment or Marijuana Testing Facility, or are a Dual Licensee that elected to operate on a for-profit basis.
Do not complete this schedule if you are only a Nonprofit Medical Marijuana Dispensary or are a Dual Licensee that has not made the for-profit election.
What you'll need
Have the following information ready:
- Your name as shown on your Arizona return.
- Your Social Security number or employer identification number.
- Your ADHS registration identification number.
- The amounts of disallowed federal expenses for the categories on lines 1 through 14.
Include a schedule for depreciation and Section 179 expense reported on line 8, and a schedule for other expenses reported on line 14.
How to file
Include Schedule DFE with your return. Select calendar year 2025 or enter your fiscal-year beginning and ending dates, and complete the identification fields.
Enter disallowed federal expenses in the categories on lines 1 through 14. Add those lines and enter the total on line 16. If the total is less than zero, enter “0.”
Report the line 16 amount on the applicable Arizona return as follows:
Individuals and sole proprietors
- Form 140: Other Subtractions, page 6, line P.
- Form 140PY: Other Subtractions, page 6, line U.
- Form 140NR: Other Subtractions, page 6, line K.
- Form 140X: Include the amount on line 25.
- Form 140-SBI: Line 46.
- Form 140PY-SBI or 140NR-SBI: Line 43.
- Form 140X-SBI: Line 47.
C corporations
- Form 120: Page 5, Schedule B - Worksheet, line B10 - O1.
- Form 120A: Page 4, Schedule B - Worksheet, line B10 - M1.
- Form 120X: Page 5, Schedule E - Worksheet, line E10 - O1.
S corporations
- For each Arizona resident shareholder: Form 120S, Schedule K-1, line 6.
- For each nonresident shareholder: Form 120S, Schedule K-1(NR), line 19.
Partnerships
- Form 165: Page 6, Adjustment of Partnership Income From Federal to Arizona Basis Continued, Schedule B, line B5 - G.
Trusts and estates
- Form 141: Schedule B, line B9.
Common mistakes
- Completing the schedule when you are only a Nonprofit Medical Marijuana Dispensary or a Dual Licensee without the for-profit election. The form says not to complete it in these cases.
- Forgetting to include Schedule DFE with your return.
- Leaving out the schedules required for line 8, depreciation and Section 179 expense, or line 14, other expenses.
- Entering a negative total on line 16. The form says to enter “0” if the total is less than zero.
Questions people ask
Can I use this schedule for a fiscal year?
Yes. The form provides a calendar year 2025 checkbox and a fiscal-year option with spaces for beginning and ending dates.
Which expenses make up the line 16 total?
Add the disallowed federal expenses on lines 1 through 14. These categories include officer compensation, wages and salaries, repairs and maintenance, bad debts, rental or lease expense, taxes and licenses, interest, depreciation and Section 179 expense, depletion, advertising, guaranteed payments to partners, pension and profit-sharing plans, employee benefit programs, and other expenses.
Do I use line 15 for additional expenses?
No. Line 15 is reserved for future use. Other expenses are reported on line 14, with a schedule included.
Can a nonprofit-only medical marijuana dispensary complete this schedule?
No. The form says not to complete Schedule DFE if you are a Nonprofit Medical Marijuana Dispensary only.