Associated Press: “Edible marijuana products in Colorado may soon come labeled with a red stop sign, according to a draft of new rules released Wednesday by state marijuana regulators. The state may also ban the word “candy” from edible pot products“
Arizona Daily Star: “A judge has rejected efforts by a marijuana advocacy group to quash limits set by the Department of Health Services on how and when patients with post-traumatic stress disorder can legally use the drug. In a ruling Wednesday, Maricopa County Superior Court Judge Crane McClennen said there was ‘substantial evidence’ to support the restrictions imposed last year by Will Humble, who was state health chief at the time. And McClennen said adopting the views of the Arizona Cannabis Nurses Association that the restrictions are inappropriate would amount to requiring him to substitute his own judgment for that of the health chief, something he legally cannot do.”
Arizona Republic: “Three medical-marijuana companies are eyeing the Scottsdale Airpark for new dispensary locations as they look to tap into one of Arizona’s highest concentrations of patients authorized to use the drug. . . . The Scottsdale City Council on July 1 awarded a permit for Green Sky Patient Center, which could become the city’s second operating dispensary. . . . Scottsdale Dispensary, has applied for city approval to move its existing dispensary from Mayer — a community of 1,400 people near Prescott — into the Scottsdale Airpark”
The author of this website, Richard Keyt, is mentioned several times in this Arizona Republic story.
Yahoo News: “As cannabis bans are relaxed in more U.S. states, the race is on to develop an instant roadside breathalyzer for police to test drivers who may be taking the ‘high’ road. Vancouver-based Cannabix Technologies Inc, founded by a retired Royal Canadian Mounted Police officer, expects to be first out of the gate with a ‘pot breathalyzer‘ – a handheld device similar to those used to detect alcohol.”
Section 280E of the Internal Revenue Code is legalized marijuana businesses worst nightmare. This statute disallows deductions from federal taxable income of all typical business expenses except the cost of goods sold. See my previous articles below:
After losing in the U.S. Tax Court, the Vapor Room’s owner appealed to the 9th Circuit Court of Appeals. On July 9, 2015, the Court of Appeals issued its opinion Olive vs. Commissioner, and affirmed the Tax Court’s decision.
In a Forbes.com article called “Big Court Defeat For Marijuana Despite Record Tax Harvests” the author said,
“Should marijuana businesses pay tax on gross profits or net profits? It sounds like a silly question. Virtually every business in every country pays tax only on net profits, after expenses. But the topsy-turvy rules for marijuana seem to defy logic. . . . Now, in another blow to the budding industry, is the IRS has convinced the influential Ninth Circuit Court of Appeals that marijuana dispensaries cannot deduct business expenses, must pay taxes on 100% of their gross income. The case, Olive v. Commissioner, was an appeal from a U.S. Tax Court decision.”
Another Forbes.com article called “Ninth Circuit: Legal Or Not, Marijuana Facility Cannot Deduct Its Expenses” states,
“a decades-old provision of the federal tax code remains firmly in place, threatening to administer a painful amount of tax on marijuana facilities, and serving as a greater barrier to entry into the industry than any outdated notion of moral or ethical impropriety. The IRS has been wielding a little known Code section — Section 280E, to be exact — to wage war on medicinal and recreational marijuana facilities. Section 280E provides that no deduction — other than the cost to purchase or grow the marijuana inventory, or Cost of Goods Sold (COGS) — shall be allowed for any amount incurred in a business that consists of ‘trafficking in controlled substances’.”
Martin Olive argued that even though he could not deduct expenses arising from his marijuana business he should able to deduct expenses attributable to his side businesses that did not involve selling marijuana. The Court of Appeals acknowledged the concept, but after giving an example of multiple businesses it concluded that Martin Olive did not, in fact, have any business other than the marijuana business. The Court gave the following hypotheticals:
“An analogy may help to illustrate the difference between the Vapor Room and the business at issue in CHAMP. Bookstore A sells books. It also supplies some complimentary amenities: patrons can sit in comfortable seating areas while considering whether to buy a book; they can drink coffee or tea and eat cookies, all of which the bookstore offers at no charge; they can obtain advice from the staff about new authors, book clubs, community events, and the like; they can bring their children to a weekend story time or an after-school reading circle. The ‘trade or business’ of Bookstore A ‘consists of’ selling books. It’s many amenities do not alter that conclusion; presumably, the owner hopes to attract buyers of books by creating an alluring atmosphere. By contrast, Bookstore B sells books but also sells coffee and pastries, which customers can consume in a café-like seating area. Bookstore B has two ‘trades or businesses,’ one of which consists of selling books and the other of which ‘consists of’ selling food and beverages.
CHAMP
[the tax payer in a Tax Court case where the court found the taxpayer had more than one line of businesses], the court concluded, was Bookstore B. The Vapor Room, on the other hand, was Bookstore A.See also “Why Your Dispensary Needs to Rent More Space than Needed for its Retail Store,” which discusses the CHAMP case.
The Fresno Bee: ” The cost of inaction couldn’t be more clear. Acres of ancient trees are disappearing and illegal marijuana farms are popping up in their place. Streams and rivers are being sucked dry, diverted sometimes miles away through plastic pipes into tanks. Several species of fish, along with a rare breed of wild rodent, are on the verge of extinction. All of this is happening now, all across California, but particularly in the North Coast and in our national parks in the San Joaquin Valley. All of this environmental destruction is occurring to grow marijuana and meet consumer demand. While there’s plenty of blame to go around for how things have turned out in the nearly 20 years since California legalized medical marijuana, much of it must land at the feet of consumers, and of lawmakers.
Florence Reminder & Blade Tribune: “Rocky Pahwa finally received from Pinal County what he could never get from Florence in years of trying: a permit to operate a medical marijuana dispensary. . . . The location is just outside the town boundary at a former RV repair shop, in a county island off Arizona 79B.” The dispensary will be owned and operated by Healing Healthcare 3, Inc.
Today I am one of several people speaking at the Arizona State Bar convention on a topic called “Representing Clients Regarding the Development, Finance and Operation of Medical Marijuana Dispensaries.” The real estate section of the Bar is presenting this panel discussion by me and attorneys Ryan Hurley, William Kozub, Carolyn Goldman, Robert Itkin and Lindsay Schube.
Bloomberg Business: “People are flocking to buy weed, but they’re not paying as much for it. . . . [P]rices are declining faster than some had expected, while the number of people visiting the stores has increased. . . . Since last June, the average price of an 1/8th ounce of recreational cannabis has dropped from $50-$70 to $30-$45 currently; an ounce now sells for between $250 and $300 on average compared to $300-$400 last year. More competition and expansion of grow facilities contributed to this price decline, but it is also a natural result for any maturing industry as dispensaries try to find the market’s equilibrium price.
Eloy News: “Have a little reefer … it won’t kill you. Or will it? To believe what Pinal County attorney Lando Voyles and Maricopa County attorney Bill Montgomery preach about marijuana is akin to believing a little movie called “Reefer Madness” that was released in 1936. . . . I used to be a staunch critic of legalizing pot. But I looked closer at the facts and the scientific data. I evolved, and now feel a little silly for holding those prior beliefs. America has evolved as well.”
Associated Press: “Marijuana is only legal for medical purposes in California, but that isn’t stopping purveyors of pot-infused cupcakes, nuts and other edible forms of the drug from putting on an outdoor food festival to showcase their wares. The ‘Get Baked Sale’ happening Saturday at a food truck hub in San Francisco comes as marijuana advocates are working to legalize recreational use of the drug through a statewide voter initiative in November 2016.
KTLA 5: “During a police raid on an unpermitted pot shop in Santa Ana late last month, hidden cameras caught officers eating marijuana-laced “edibles,” playing darts and displaying other questionable behavior, according to an attorney who plans to sue the city in connection with the raid. The incident occurred at Sky High Holistic, a medical marijuana dispensary operating without a business permit, officials with the Santa Ana Police Department confirmed. . . . Video of the raid was taken by the regular surveillance cameras the shop had in place, as well as a hidden one set up in anticipation of a police visit.”
The Aspen Times: “These are interesting and challenging times for Jordan Lewis, CEO of Silverpeak Apothecary, which sells both recreational and medical marijuana in Aspen. Lewis will appear before Pitkin County commissioners . . . in a work session focused on the marijuana smells that some neighbors say are wafting from High Valley Farms, the midvalley pot farm that Lewis owns and operates. . . . Neighbors are upset about the smell, and commissioners are listening. . . . The license is up for renewal in September, and commissioners have said they won’t approve it should the stench persist.”
myfoxny.com: “Colorado is full of all-inclusive ranch resorts where guests hike, fish, play horseshoes and roast marshmallows. This one has a new offering – smoking pot. The 170-acre CannaCamp opening July 1 in Durango in southwest Colorado calls itself the nation’s first cannabis-friendly ranch resort. Guests won’t be given marijuana, because that violates state law. Instead, the resort allows guests to bring their own pot and use it while at the resort.”
USA Today: “Emotions appeared to be sky high at the newly formed First Church of Cannabis after the Internal Revenue Service granted it nonprofit status. The designation means donors can deduct gifts to the church on their federal tax returns if they itemize and the church is eligible for a property-tax exemption in Indiana. The organization has raised $10,905 in a gofundme.com solicitation but has not found a home yet. “What a GLORIOUS DAY it is folks,” the founder and grand poohbah, Bill Levin, wrote May 26 in a Facebook post announcing the church’s IRS approval as 501 (c) (3) charitable organization.
Vice News: “When Andre Maestas decided he wanted to sit down in the street — the sort of random, possibly dangerous thing college students do sometimes — he didn’t think it would lead to his current legal conflagration. He says he was taking a cigarette break from a movie night with a friend on Arizona State University’s main campus in Tempe when his troubles first started. ‘I was in the process of standing back up to go back into the dorm to finish watching the movie we were watching,’ he said about the night in March 2014, ‘and as I was getting back up, that’s when the cop’s lights went on and he came out and started yelling at me’. . . . Mark Johnson, an Arizona State University spokesperson, said the university’s policies are rooted in the same rules. ‘Marijuana on campus is prohibited by state law and by federal laws, including several that specifically apply to institutions of higher learning,’ Johnson said.
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ABC15.com: “The Arizona Supreme Court recently agreed to review an appeals court decision that decided drivers who have medical marijuana cards can be prosecuted for driving under the influence if they’re found to have marijuana in their system. In two cases, defendants who had medical marijuana cards argued they should be able to use their medical marijuana cards as defense like other prescription drugs are used. But, the District One appeals court disagreed. The court ruled the medical marijuana law doesn’t provide immunity for patients because it’s not prescribed by a doctor, it’s recommended.”
Arizona Republic: “Second marijuana initiative filed . . . The Campaign to Legalize and Regulate Marijuana filed paperwork last week for a competing effort to legalize marijuana, potentially jeopardizing any effort to legalize the drug in 2016. Like the first initiative, the group seeks to let adults carry up to an ounce of marijuana and proposes a 15 percent tax to help fund public education. However, those who carry more than 8 ounces of marijuana could be slapped with a misdemeanor, as opposed to a felony, as the first initiative proposes.”
ABC15.com: “Go on Craigslist and search for marijuana, and you’ll likely come across quite a few posts advertising for ‘patient-to-patient’ exchanges or delivery of the drug. The ads will ask for other medical marijuana patients only and, often, they’ll ask for a ‘donation’ fee. . . . calling the money exchanged a donation, doesn’t help either. ‘That donation, 100 percent of the time that I’ve had interaction with that
See also “Are Arizona Cannabis Clubs Legal Under Arizona’s Medical Marijuana Laws?“
Phoenix New Times: “A popular medical-marijuana club that hosted regular ‘Farmer’s Markets’ was raided by a Glendale SWAT team on Wednesday, resulting in nine arrests at five different locations. . . . The 7Ten Club advertises with a slick website and frequently updated Facebook page, billing itself as “Arizona’s Premier Medical Marijuana Club.”
Phoenix New Times: “A law-enforcement task force in Yavapai County cut a $50,000 check from RICO funds to a substance-abuse group dedicated to fighting marijuana legalization in Arizona, New Times has learned. The deal between the Yavapai County-based Partners Against Narcotics Trafficking (PANT) task force and MATFORCE was made soon after the Marijuana Policy Project announced it would launch a 2016 legalization campaign in Arizona — and more public funding against legalization could be on the way. Last week, Arizona Attorney General Mark Brnovich issued an opinion, based on a question by Yavapai County Attorney Sheila Polk, that public resources could continue to “educate” the public about the alleged evils of marijuana legalization.”
Riddell Williams: “Given the disconnect between federal law and that of an increasing number of states, marijuana-related businesses and their landlords, vendors, and lenders are confronted with dicey legal issues. The availability of bankruptcy relief is one of the latest. A bankruptcy court was recently asked to decide whether it could (or should) enter an involuntary order of relief against a medical marijuana dispensary management entity, even though the debtor-entity’s business activities are illegal under federal law. In re Medpoint Management, LLC, 528 B.R. 178, 182 (Bankr. D. Az.). The court answered in the negative, consistent with earlier cases barring bankruptcy relief for debtors engaged in the marijuana business or in leasing to marijuana businesses. . . . Under Arenas, individual debtors engaged in the marijuana business should be aware that the bankruptcy discharge is probably not available to them. Debtors who simply lease space to marijuana businesses can expect to be barred from obtaining relief under the Bankruptcy Code under Rent-Rite. Under Medpoint, anyone considering extending loans or trade credit to marijuana businesses should proceed with the utmost caution and cannot count on seeking a remedy in bankruptcy court if a marijuana business fails to pay.
The Foothills Focus: “The Zen Dispensary, which provides medical marijuana, is now open in New River. . . . [It is] located at 46639 N. Black Canyon Highway, in the Riverside Plaza. ” See Zen’s website.
Constitutional Daily: “Comments from a GOP presidential contender and a federal judge have put the issue of states legalizing marijuana back on the constitutional front burner. As many people know, four states and the District of Columbia have passed laws to make recreational pot use legal under certain circumstances. And 23 states and the federal district have legalized marijuana for medical use. . . . The conflict between state laws that allow limited marijuana use and the federal law that bars it, in theory, falls somewhere in the domain of the Constitution’s Supremacy Clause.”
USA Today: “The smell of marijuana hung heavy over the city this weekend as partiers celebrated the unofficial “420” pot holiday. April 20 has long been an important date within the marijuana community, and Denver for several years has hosted a massive marijuana festival to mark the day. This year was no different — except that pot smokers were joined in the city by investment bankers, lawyers and angel investors looking to cash in on the newly legal and fast-growing industry.”
Reuters: The Marijuana Policy Project “Arizona voters can anticipate being courted by both marijuana advocates and their opponents over the coming year, as the state becomes one of the latest battlegrounds in the debate over the legalization of recreational weed. Supporters submitted a ballot initiative to legalize recreational marijuana in Arizona Friday. If they collect 150,642 signatures of registered voters before June of next year, the question of whether to permit pot to be smoked in private residences will be put to the state’s voters in 2016.
Fortune: “Legalized marijuana sales are spreading across the U.S., but the industry’s businesses are facing steep federal tax bills thanks to a wrinkle in the tax code dating back to the 1980’s. . . . In 1982, Congress enacted Section 280E of the federal Tax Code to prevent drug traffickers from being able to claim business expenses related to illicit dealings on their federal tax returns. . . . many marijuana business owners end up paying effective tax rates of anywhere from 40% to 70%“
Fox10Phoenix.com: “An Arizona State University student has a valid Arizona Medical Marijuana Card, but now he’s facing a criminal conviction for using his legal, medical marijuana on campus. He’s fighting the conviction and says he shouldn’t have been treated differently than any other medical marijuana patient, just because he lives on campus. Andre Maestas has been using marijuana to relieve his back pain for several years.”
Mr. Yuri Downing made news recently when the U.S. Bankruptcy Court issued an opinion on April 6, 2015, in a case called “In re Medpoint Management, LLC.” The case involved creditors of Medpoint Management, LLC, who filed an involuntary bankruptcy petition in which they asked the bankruptcy court to liquidate Medpoint Management, LLC, under Chapter 7 of the bankruptcy law. The court dismissed the petition because the creditors had “unclean hands” because they entered into contracts that involved marijuana.
Medpoint Management, LLC, is owned by two members, Ask Nice Twice, LLC (“ANT”), and Here Is Now, LLC (“HIN”). ANT is the manager of Medpoint. Yuri Downing (“Downing”) is the 100% owner of both ANT and HIN, and is Medpoint’s statutory agent.
Medpoint become involved in the management of Arizona Nature’s Wellness, an Arizona nonprofit corporation (“ANW”), that owned and operated an Arizona medical marijuana dispensary. Medpoint formerly managed ANW’s marijuana business, business relationships and cultivation operations. Medpoint purchased all of the membership interests in Tier Management, LLC, an Arizona LLC (“Tier”). On January 2, 2013, Tier entered into a Cultivation and Dispensary Services Agreement with ANW. Infinite Bloom, LLC, owned by Medpoint Management, LLC, had 70 employees and provided services on behalf of ANW.
At some point in time ANW ceased to be managed by Medpoint and entered into contracts for dispensary and cultivation management services with Bloom Master Fund I, LLC, which is managed by L. Edward Judice and Eagle Valley Holdings, LLC (no LLC formed or registered to do business in Arizona under this name). The statutory agent for Bloom Master Fund I, LLC, is Q Business Consulting, LLC, owned by L. Edward Judice.
The bankruptcy court said “Medpoint owns the “Bloom” name and trademark (“IP”) under which ANW sells its marijuana products.” There is a federal trademark for “Bloom Dispensary,” but the U.S. Patent Trademark Office says the mark is owned by Bloom IP Industries LLC, an Arizona LLC located at 14 S. 41st Place Phoenix AZ 85034. However, there is no Arizona LLC called Bloom IP Industries LLC, nor has there ever been an Arizona LLC with that name. Bloom IP Industries, LLC, a Delaware LLC, owns a federal trademark for “Bloom.” The address for the Delaware Bloom IP Industries, LLC, is 4400 N. Scottsdale Road, Suite 288, Scottsdale AZ 85251. The tradename “Bloom Dispensary” is registered with the Arizona Secretary of State and owned by Medpoint Management, LLC, whose address is 4400 N. Scottsdale Road, Suite 288, Scottsdale AZ 85251.
The creditors in the In re Medpoint Management, LLC case are:
Yuri Downing, the man who controls Medpoint Management, LLC, made headlines in the early 2000s in Arizona. Here are some interesting statements found in an article about Yuri Downing in the East Valley Tribune called “A man’s bizarre odyssey to infamy.”
“Yuri Downing was looking for some fast money on a cool March evening this year as he drove the dark, narrow road through Indian farmlands just east of Scottsdale. . . . Then Downing saw patrol lights flashing in the rearview mirror of his white Mercedes. He knew he was in trouble.
A loaded pistol was wrapped in a towel on the passenger-side floorboard. In the trunk, mixed in with piles of clothes, were hundreds of contraband documents, including stolen utility bills and fake Mexican identification cards. The IDs featured Downing’s photo and a variety of different names. . . .
By July 2004, he had been indicted on six felony counts and ordered to repay his share of the money. Six months later, Downing pleaded guilty to one of the charges against him.”
McClatchyDC: “For owners of marijuana businesses, April 15 is one big downer. While most business owners rush to meet the federal tax deadline and cash in on a plethora of deductions, pot store owners and growers complain that they can’t write off a single expense, even if they have state licenses. They want the law changed, saying it’s discriminatory and outdated as more states move to legalize marijuana.”