Huffington Post: “Last week, in a pair of unanimous decisions, the Arizona Supreme Court ruled that prosecutors and courts cannot ban qualified patients on parole or probation from using medical marijuana. This is one example where Arizona leads the nation in protecting patients who use medical marijuana. . . . The Republican-led state, intentionally or not, is paving the way for better patient protections.”
Portland Tribune: “This week, Rep. Earl Blumenauer (D-Ore.) and Sen. Ron Wyden (D-Ore.) will introduce bicameral legislation to reconcile state marijuana laws and federal tax law — particularly Section 280E. The sensible-sounding Small Business Tax Equity Act would allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business. Currently, legitimate sellers of medical marijuana cannot declare such common items as rent, utilities and professional services (accounting) as expenses on their federal tax forms. They end up in a 70- to 90-percent tax bracket, instead of the more usual 20 percent for small businesses that the U.S. Small Business Administration estimates.”
readability.com: “There’s an Uber for everything nowadays, so why not an Uber for weed? Eaze, a startup that enables medical marijuana patients to order cannabis products online and have those goodies delivered to their homes, today is announcing $10 million in Series A round funding . . . . The new funds come on top of $1.5 million in seed funding the company had raised last year. The cash will be used to help the company expand availability of its platform into new markets beyond just the San Francisco Bay Area, where it was founded.”
Arizona Daily Star: “For years, supporters of legalizing marijuana for recreational use have been looking to 2016 as the year they would take their initiative to Arizona voters and win. Now they are split in a way that endangers the prospects for legalization. The division is pitting many of Arizona medical-marijuana dispensary owners against the Marijuana Policy Project, a national organization that is responsible for its industry’s existence, having drafted our state’s 2010 medical-marijuana law and funded the campaign. . . . On March 29, the national policy project’s executive director, Rob Kampia, threatened in an email to ruin the dispensary business of Phoenix-area physician Gina Berman, who is leading the breakaway group. ‘If you file a competing initiative with the Secretary of State anyway, we will specifically launch a series of actions to harm your business . . . . I’m already budgeting $10,000 . . . to pay people . . . to distribute literature outside of your front door, and the literature will not portray you in a kind way. We will not target any other dispensaries; we will only target you.'”
eNews Park Forest: “Representative Earl Blumenauer (D-OR-03) and Senator Ron Wyden (D-OR) announced plans to introduce bicameral legislation next week that would reconcile state marijuana laws and federal tax law. The Small Business Tax Equity Act, which was introduced last Congress by Congressman Blumenauer, would create an exception to Internal Revenue Code Section 280E to allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.”
Here’s the text of Congressman Blumenauer’s and Senator Wyden’s press release:
The Small Business Tax Equity Act of 2015
Congressman Earl Blumenauer ■ Third District of Oregon ■ www.blumenauer.house.gov
Senator Ron Wyden ■ Oregon ■ www.wyden.senate.govBackground : Currently, the federal tax code prohibits anyone who sells Schedule I or Schedule II substances from deducting their business expenses from their taxes. Congress added this prohibition in 1982 after a drug dealer claimed his yacht and weapon purchases as legitimate business expenses.
Marijuana is a Schedule I substance , and therefore , even businesses operating in compliance with state law are not allowed to deduct the common expenses of running a small business , like rent, most utilities and payroll . They cannot claim the Work Opportunity Tax Credit if they hire a veteran, and they are limited in lawful deduction s relating to construction or operation costs if they want to remodel a building for their retail operations.
Legalization of Medical Marijuana
- Twenty – three states, the District of Columbia and Guam have passed laws allowing for the legal use of medical marijuana. A n additional 12 states have passed laws allowing the use of low – THC forms of marijuana to treat certain medical conditions.
- There are over one million legal medical marijuana patients across the country , and in many states, medical marijuana is sold through dispensaries . These dispensaries provide safe, legal facilities for patients who have a recommendation from a physician.
Legalization of Adult Use of Marijuana
- In Colorado, Washington, Oregon, Alaska and the District of Columbia, voters passed measures allowing for the legal adult use of marijuana.
- Businesses in Colorado and Washington – from the production to retail side of the industry – are already up and running in compliance with state law.
Fairness to these Legal Businesses
- Because marijuana businesses are not allowed to deduct their expenses, this means that in certain circumstances, legal marijuana businesses can pay federal income tax rates at nearly 90 percent, while the U.S. Small Business Administration estimates that many small businesses pay an effective rate of around 20 percent.
- All businesses should pay their fair share of taxes, but not being able to deduct expenses creates a disproportionate burden that can put small marijuana dispensaries out of business and will keep many good actors from entering the industry in the first place, forcing the industry underground.
- Barring the marijuana industry from operating like a normal industry just incentivizes criminal activity and tax evasion.
What the Bill Does: The Small Business Tax Equity Act of 2015 creates an exception to Internal Revenue Code section 280E to allow businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.
This Legislation is Supported By: Americans for Tax Reform, the National Cannabis Industry Association, Drug Policy Alliance, Marijuana Policy Project, Americans for Safe Access, NORML
For further information about the Small Business Tax Equity Act, please contact:
Stephanie Phillips in Congressman Blumenauer’s office at (202) 225-4811
Charlie Pope with the Senate Finance Committee at (202) 224-4515
Jurist: “he Arizona Supreme Court ruled Tuesday in two separate decisions that courts cannot prohibit parolees from using medical marijuana when used for medical purposes under the Arizona Medical Marijuana Act (AMMA). The AMMA was passed by the legislature in 2010, and both plaintiffs obtained registry identification cards because of medical conditions for which doctors prescribed marijuana treatment.”
The cases are Arizona v. Ferrell and Reed-Kaliher v. Hoggatt.
Phoenix New Times: “The chances of a successful marijuana-legalization initiative in Arizona for 2016 appear to have diminished due to fighting among two competing political groups. As we reported on March 27, the Marijuana Policy Project of Arizona was surprised by the sudden launch of a competing 2016 campaign by their chairperson, Dr. Gina Berman. A leaked online survey shows that a coalition of Arizona medical-marijuana dispensaries are backing Berman’s group.”
The table below contains the names of the entities that hold Arizona medical marijuana dispensary registration certificates, aka dispensary licenses, and their addresses and phone numbers as of January 1, 2015. To get more information about a dispensary, search the name of the dispensary in the Arizona Corporation Commission’s database.
Arizona Republic: “Medical marijuana cardholders in Arizona could see changes in the way edible products are labeled. The state created a $58,000 contract with the Coconino County Public Health Services District focused on studying how to strengthen the packing, labeling and storage of edible products. A survey was distributed to patients at dispensaries across the state to gauge their level of education about medical marijuana and how they use it.”
Arizona Republic: “The guy who’s heading up an effort to throw open Arizona’s doors to recreational marijuana is sounding like he might need to light up a little more often. On Sunday, Rob Kampia, executive director of the Washington D.C.-based Marijuana Policy Project, fired off a threatening email to an Arizona doctor who hopes to put a more incremental measure on the 2016 ballot.”
Phoenix Business Journal: “Will Humble, who resigned in March as director of the Arizona Department of Health Services, has landed at the University of Arizona, where he has served as adjunct faculty for nearly a dozen years. On April 13, he will begin his new position as division director for health policy and evaluation at the Center for Population Science and Discovery at the Arizona Health Sciences Center.”
KTAR News: “Concerns are growing over the potential for Arizona to face an overabundance of medical marijuana.”
The Gazette: “Colorado made headlines worldwide when recreational marijuana went on sale to the public in January 2014. . . . And amid all the hoopla around legalized recreational pot, its older cousin, the medical marijuana (MMJ) industry — with 505 stores throughout Colorado — quietly continued to grow, adding patients by the thousands who seemingly had no problem finding physicians willing to diagnose what critics say are often phantom medical conditions.”
willcoxrangenews.com: “When Cathy’s Compassion Center opened its doors in the rural community of Cochise just over two years ago, it was the first medical marijuana dispensary to go online in the county and the third in the state. Now, the budding enterprise located near Willcox has expanded from 400 square feet to include 15,000 square feet of indoor and outdoor cultivation, with plans to apply to Cochise County for permission to add 44,500 square feet on top of that. The rural dispensary delivers across the state, with a staff of just three people, having served roughly 25,000 patients since it opened.”
Washington Post: “Deep in the Columbia River Gorge, a short drive from the Bridge of the Gods, the nation’s only government-run marijuana shop was running low on weed. The store had been open for just a few days. . . . Someone cracked a joke about this being a typical government operation, always running late. . . . This government store, bearing the cozy name Cannabis Corner, sells dozens of strains of marijuana and in several different forms, from pungent buds to infused cookies and coffee. . . . And it does it all at the direction of the North Bonneville Public Development Authority, making the local government uniquely dependent on this once-illicit drug.”
Tucson Weekly: “Language allowing people to grow recreational marijuana at their homes was completely scratched from a new draft of the citizens’ initiative we might see on the 2016 ballot, making the months-long collaboration between Safer Arizona and the Marijuana Policy Project a bit rusty in recent days. Up until this draft, dated Feb. 25, cultivation rights were considered. Ten days prior, the initiative said a person could grow up to six plants and a household a total of 12. Some dispensaries were concerned this might affect their business, and, according to members of Safer Arizona and other like-minded pot advocates, this might have been a reason for removing that section.”
myfoxdc.com: “The District passed a law legalizing pot use in residences, but the city did not specify how to control the smoke going into other apartments and condos or public areas. Now, some residents are complaining about the smoke, and building managers are trying to figure out how to handle the new problem.”
CNN Money: “P. Vincent Mehdizadeh, founder and current majority shareholder of Medbox, Inc. (OTCQB:MDBX) announced today that an agreement has been executed with Lizada Capital LLC, an investor in the field of legal cannabis products, that would result in the transfer of the majority of Mr. Mehdizadeh’s shares of MDBX [Medbox] to that firm.”
Phoenix New Times: “A new poll suggests marijuana legalization has “strong support” in Arizona. The poll from Arizona State University Morrison Institute for Public Policy asked Arizonans what they’d like to see done regarding marijuana in Arizona, and found that 45 percent supported full legalization, while 42 percent support a medical-only program, and 13 percent want marijuana completely outlawed in the state.
Free Republic: “Investors in small cannabis companies lost $23.3 billion in 2014 because shady stock promoters are capitalizing on the slow tide of legalization in the US by manipulating the penny stock market with “pump and dump” schemes. . . . In 2014, pot companies had the most drastic ups and downs for penny stocks according to data analyzed by Openfolio, a social network for investors to share which stocks they’re trading. This indicates that pumping and dumping marijuana stocks has accelerated to a pretty insane degree.”
myway.com: “The District of Columbia defied threats from Congress and moved forward Thursday with legalizing possession of marijuana after a voter-approved initiative. Despite last-minute maneuvers by Republican leaders in Congress and threats that city leaders could face prison time, D.C. Mayor Muriel Bowser said the city was implementing marijuana legalization as approved by voters. The new law took effect at 12:01 a.m.”
Associated Press: “a federal lawsuit is being filed on behalf of two Colorado citizens by a Washington D.C.-based group to shut down the state’s $800-million-a-year marijuana industry early Thursday, Feb. 19, 2015, in Denver. The lawsuit is being sponsored by a group called the Safe Streets Alliance, which is based in the nation’s capital and opposes marijuana legalization. . . . The owners of a mountain hotel and a southern Colorado horse farm argue in a pair of lawsuits filed Thursday in U.S. District Court in Denver that the 2012 marijuana-legalization measure has hurt their property and that the marijuana industry is stinky and attracts unsavory visitors.”
Washington Post: “The District of Columbia could soon earn a new nickname: the Wild West of marijuana. In 10 days, a voter-approved initiative to legalize marijuana will take effect, D.C. officials say. Residents and visitors old enough to drink a beer will be able to possess enough pot to roll 100 joints. They will be able to carry it, share it, smoke it and grow it. But it’s entirely unclear how anyone will obtain it. Unlike the four states where voters have approved recreational pot use, the District government has been barred from establishing rules governing how marijuana will be sold. It was prohibited from doing so by Congress, which has jurisdiction over the city.”
Above the Law: “In addition to their many other challenges, cannabis businesses must also contend with punitive federal tax rules. In 1982, Congress enacted Section 280E of the Tax Code as a way to punish drug traffickers. . . . . IRC 280E negatively impacts just about all marijuana businesses.”
NBC News: “Weed history is being made in Seattle: the first vending machines to dispense marijuana flower buds debuted Tuesday. The machines, called ZaZZZ, are being placed in medical pot dispensaries, which helps to verify customer’s age and identity since medical marijuana cards are required to enter the centers, said Greg Patrick, a spokesman for the maker of ZaZZZ, American Green. Though vending machines appeared for the first time in Colorado last year, those sold only edibles, or cannabis-infused foods, and not the plant’s flower buds that are so often associated with smoking pot.”
The Leaf Online: “A byzantine legal memo of potentially disastrous implications has been released by the Internal Revenue Service, articulating a new theory of the tax code which could result in punitive audits, crippling tax bills and even federal raids for state-legal cannabis retailers — though, curiously, not necessarily for growers. The federal memo [Warning: extremely esoteric — Ed.], released on January 23rd, poses an existential threat to state-legal dispensaries and adult-use retail stores which have heretofore operated under the largesse of US Tax Court decisions like Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue“
Phoenix New Times: “A few Republican lawmakers are trying to sneak past the Voter Protection Act with a draconian DUI bill that targets the state’s medical-marijuana users. State Representative Sonny Borrelli, R-Kingman, is the prime sponsor of HB 2273, a bill that could result in DUI convictions for medical-cannabis users who aren’t impaired while driving. Borrelli’s bill would reverse an Arizona Supreme Court ruling in April 2014 that prohibits DUI convictions based solely on the presence in the bloodstream of a marijuana compound known to be incapable of causing impairment.”
Forbes.com: Internal Revenue Code “Section 280E provides that ‘no deduction is allowed for any amount incurred in a business that consists of trafficking in controlled substances.’ Because marijuana finds itself on Schedule I of the Controlled Substances Act, the IRS has the ammunition necessary to deny the deductions of any facility that sells the drug. And it does. Regularly. On Friday, the IRS released Chief Counsel Memorandum 201504011, which sheds some interesting new light on what expenses a seller of marijuana businesses may and may not deduct, but in order to understand the memo’s impact, we’ve got to take a tour through several Internal Revenue Code provisions – namely Sections 61, 471, and 263A — and understand how they interplay with Section 280E.”
The following questions and answers are from Chief Counsel Memorandum 201504011:
(1) How does a taxpayer trafficking in a Schedule I or Schedule II controlled substance determine cost of goods sold (‘COGS’) for the purposes of §280E of the Internal Revenue Code (‘Code’)?
(2) May Examination or Appeals require a taxpayer trafficking in a Schedule I or Schedule II controlled substance to change to an inventory method for that controlled substance when the taxpayer currently deducts otherwise inventoriable costs from gross income?
CONCLUSION
(1) A taxpayer trafficking in a Schedule I or Schedule II controlled substance determines COGS using the applicable inventory – costing regulations under §471 as they existed when §280E was enacted.
(2) Yes, unless the taxpayer is properly using a non-inventory method to account for the Schedule I or Schedule II controlled substance pursuant to the Code, Regulations, or other published guidance.
Vincent Mehdizadeh, founder and majority shareholder of Medbox Inc. issued the following statement about the Josh Crystal vs. Medbox, Inc. lawsuit:
“I just wanted to clarify that one lawsuit was filed and announced on the company’s ticker without, to my knowledge, obtaining the company’s consent. Thereafter, 8 different Plaintiff’s firms, or potentially just referral services, announced that same lawsuit, again without seeking the company’s permission in citing the company’s ticker symbol, in an effort to further solicit clients. It’s a shame that we live in a ‘sue first and get clients later’ type of world but that is the reality,” stated Vincent Mehdizadeh, Founder and Majority Shareholder at Medbox. “I was personally sued in the lawsuit and I can safely say that the allegations contained in the complaint are not accurate. During my tenure with the company I personally witnessed a very supportive shareholder base and I still believe the same holds true to this day. In addition, I will be personally engaging an independent public company accounting firm, on my own, to review prior periods as stated and address GAAP compliance, materiality, and fight this suit vigorously. Although this is not a formal company response on the matter, I needed to set the record straight and now I have.”
The Hill: “Colorado’s decision to legalize marijuana was a bad idea, the state’s governor said Friday. Gov. John Hickenlooper, a Democrat who opposed the 2012 decision by voters to make pot legal, said the state still doesn’t fully know what the unintended consequences of the move will be.”