In the eyes of the law

One of the main issues with federal marijuana policy is that it is completely inconsistent and unpredictable. In my last post I opined that Obama might tackle this issue prior to leaving office. Unfortunately, his failure to act has made the situation worse with our new AG, Jeff Sessions. Sessions has spouted a number of unsubstantiated claims regarding marijuana and has indicated that he could act to repeal the Cole Memo and to influence Congress to halt the extension of the Rohrabacher-Blumenauer (f/k/a Rohrabacher–Farr) amendment which was passed in 2014 and has been renewed annually ever since. This amendment protects medical marijuana patients complying with state law from prosecution by federal authorities. His position is at odds with the 90% of Americans who wish to see, at the very least, medical marijuana legalized. There are many who recognize that the placement of marijuana on Schedule 1 of the Controlled Substances Act (classifying marijuana as a dangerous drug on par with heroin and methamphetamines) is causing more harm than good: significant harm to those serving time for minor drug offenses, for those who wish to research its effects, and certainly making it difficult for patients with a variety of ailments from obtaining it. With respect to businesses engaged in the state-legal sale of marijuana for recreational purposes, it is not widely known that they are unable to deduct their business expenses, unlike most other businesses which are illegal at the federal level. In other words, if you run a prostitution ring or dog-fighting operation, you are permitted to deduct your rent, utilities and employment expenses. If you run a state-legal marijuana shop you must pay federal taxes on your gross income minus only the cost of goods sold due to the language in IRC 280E. This bizarre treatment is discussed in my article Marijuana Business and Sec. 280E: Potential Pitfalls for Clients and Advisers, The Tax Adviser, 46-7, 524-533 (2015) with co-author Jeffrey Gramlich. While state-legal businesses struggle with tax, banking, and the potential for a federal crackdown, states’ rights are being trampled on. In my article What Inconsistent Federal Policy Means for Marijuana Business Owners: Washington’s I-502 and the Federal Controlled Substances Act, GULR (2014/15) 50-3, 305-335, I discuss the myriad of issues that state-legal marijuana businesses face and how the federal regulation of marijuana flies in the face of the intent of our forefather’s stance on state police powers.