Regardless of how you feel about Marijuana, and its uses as a medicinal drug, what the Federal Government is doing in California is interesting vis a vis States' Rights. Businesses, declared legitimate by the state of California, are being shut down by the Federal Government, through the use of an obscure section of the Federal Tax Code. What do you think, should the Federal Government be able to selectively target and destroy a business, which is operating legitimately under State law? ----------------------------------------------------------------------- Submitted by Paula Duffy on 2011-10-05 The Internal Revenue Code section 280E, enacted into law during the early years of the Reagan Administration's war on drugs, was taken out of mothballs and used in an IRS decision against Harborside Health Center, an Oakland based medical marijuana business. NBC News reported that Harborside has grown in its five-year existence to the point that it employs 84 people; and it pays taxes to the city of Oakland, the state of California and to the IRS. Today's ruling will cost the company $2 million that the IRS claims Harborside owes for tax years 2007 and 2008. The agency used the provision to disallow standard business deductions available to all qualifying business in the country. In the state of California, as well as 15 other states, the sanctioning of medical marijuana dispensaries removed the herb from the state's list of controlled substances. That sanctioning does not, however, apply to the federal government, and depending on the mood of the local U.S. Attorney's office in those states, raids on the dispensaries can and are resumed as the offices see fit. The intent of the 1982 tax code provision was aimed at drug cartels. It was never contemplated to cover legal businesses that grow, purchase and distribute medical marijuana. Harborside's federal tax bill for the years covered by the ruling will soar from $500,000 to $2.5 million and the business' CEO predicts doom and gloom if the decision is not overturned on appeal. "I see only two outcomes here,” said Steve DeAngelo, director and chief executive of Harborside. “Either this IRS assessment has to change or we go out of business. There really isn’t a middle ground for us.”
so if your state said you didnt have to pay their taxes, would you assume that you were exempt from the federal ones? or would you be a smart cookie and pay them like everyone else does? dont be fooled, they knew that tax was there, they were just tryin to pocket it
Wonderful. Tax the employers out of existence, a fine example of selective enforcement at work. You have to wonder about a couple of things here. Why did the feds wait until the business was established and making money to figure out how to tax it? (Maybe they found the provision in a review during a search for new sources of revenue.) Why did the accountants not know about the liability? (Because he asked an agent and was told it wasn't being enforced, or didn't know either.) FWIW, the search for revenue is Priority One with the IRS these days. Just because your club is state chartered as a non profit does not mean the IRS agrees that it's non profit and will apply interpretations of (existing) rules (or make new ones to apply retroactively) as needed to bleed off the organization's money. There are a number of rod and gun clubs here in PA that have discovered this the hard way and are on the verge of closing up bankrupt. Until the budget squeeze hit, they didn't look too closely at how the accountants were handling the returns. Now they are, and going after enforcement of previously ignored minor revenue streams. Send lawyers, guns, and money, this is already messy.
the way i read that, it looks like they paid thier federal taxes along with the state ones but the IRS decided that they were not entitles to some deductions like other bussinesses, so they owe a lot more in taxes than originally paid.....
There is no question of exemption from federal taxes. They paid their federal tax just like every other business. The issue is that the IRS is disallowing their business expenses by effectively saying they are not a valid business, so cannot have valid business expenses. This in spite of the fact that the business is legally providing a legal medicine in the state where they operate. In other federal action against medical marijuana in a state that has chosen to legalize it, local patient cooperatives that grow marijuana for groups of patients are being raided the past few weeks by DEA agents in S. Oregon. The issue that should awaken even those who are opposed to medical marijuana is the federal interference in issues that are rightfully and constitutionally state/local issues. The people of these states (in almost every case, medical marijuana laws are the product of citizen initiatives) have decided that they wish to allow marijuana to be used medically. The marijuana is grown, distributed and consumed within the state, so there is no valid "interstate commerce" connection. Do you really wish the federal government to be free to overrule the decisions of the people of a state when there is no valid federal interest? If this were a matter of medical marijuana growers/distributors shipping their product to another state, the feds could, at least, argue a valid interest (though I believe a counter argument could be made if the state to which it was shipped also had medical marijuana laws that allowed such action). However, such an accusation has not been made in any case of which I am aware.
what i wish is that the fed didnt exist as a money grabbing greedy pit of exorbitant waste same for every level of government
We, the people, have - through the votes and/or lack of votes, lack of action, and sheer blindness to the responsibilities of a citizen in this Republic, allowed this to come to pass. Perhaps not us, individually, but us the citizens as a whole, since 1913, have allowed the rampant growth and deepening of the money pit that we call our Federal and State Governments. Complacency on the part of our predecessors, acceptance on our parts has allowed, and in many cases encouraged the issues we face today. The fact is, as long as the 16th Amendment remains on the books, the IRS has this power. Who regulates the IRS? Ask anyone and they will most likely say our Government. I laugh at that statement. I think it is rather the reverse. As long as the Fed and IRS exist, we as a country and ostensibly the world (due to interconnectedness of international banking) face the coming storm. States rights - according to the original framers of the Constitution - who had no IRS or this massive government - were supposed to supersede Federal Laws. In fact Jefferson himself was quoted as saying: This has been allowed to happen. He also wrote the following resolution - which was in response to the Alien and Sedition Acts - There exists today, a more totalitarian government than was ever intended by our Founding Fathers, that is fact. We, the people, are responsible for this, we have to change it. If we do not, it will worsen.
Federal crackdown on medical pot sales reflects a shift in policy California's U.S. attorneys say they are going after for-profit marijuana sellers. Advocates of the sales say they are concerned about buyers with health needs. <table cellspacing="0"><tbody><tr><td> At a news conference in Sacramento, Andre Birotte Jr., the U.S. attorney for the Central District of California, displays an enlarged copy of a marijuana magazine cover that cites California as the most profitable state for marijuana sales. With him is U.S. Atty. Melinda Haag of the Northern District. (Rich Pedroncelli, Associated Press / October 7, 2011) </td></tr></tbody></table> Share8 Comments 2 By John Hoeffel, Los Angeles Times October 8, 2011 The Obama administration's crackdown on California's highly profitable medical marijuana industry represents a dramatic departure from the low-key approach it has long pursued. California's four U.S. attorneys said Friday that they are taking aim at large-scale growers and dispensary owners who are raking in millions of dollars while falsely claiming that their medical marijuana operations comply with state law, which does not allow for-profit sales. In the early days of President Obama's tenure, Atty. Gen. Eric Holder announced that prosecutors would not target medical marijuana users and caregivers, as long as they followed state laws. But as the risk of prosecution diminished, storefront dispensaries and enormous growing operations proliferated in California, often in brazen defiance of zoning laws and local bans. "That is not what the California voters intended or authorized, and it is illegal under federal law," said Andre Birotte Jr., the Los Angeles-based U.S. attorney for the Central District. "It does not allow this brick-and-mortar, Costco-Wal-Mart-type model that we see across California." The step comes as the Obama administration has been steadily ratcheting up enforcement efforts. Last month, a federal firearms official sent a letter to gun dealers warning them against selling to medical marijuana users. The last bank in Colorado willing to handle money from dispensaries closed those accounts last week, concerned about federal prosecution. And the Internal Revenue Service has begun to order some dispensaries to pay millions of dollars in back taxes and penalties, ruling that they can't deduct expenses because their business is illegal. The prosecutors, who held a news conference in Sacramento to underscore their commitment to the campaign, said they are trying to enforce federal laws while respecting the intent of the state's voters, who passed the nation's first initiative to allow marijuana for medical purposes. Birotte noted that his Southern California region is home to the highest concentration of dispensaries in the nation. "We have yet to find a single instance in which a marijuana store was able to prove that it was a not-for-profit organization," he said. Medical marijuana advocates, including state Sen. Mark Leno (D-San Francisco), decried the intensified enforcement effort. "The concern here is that the intimidation factor will directly impact safe and affordable access for patients," he said. The sudden escalation has baffled advocates who note that the use of medical marijuana now has broad popular support, as shown in nationwide polls. "From a political perspective, it's hard to see how this serves Obama's interest," said Ethan Nadelmann, executive director of the Drug Policy Alliance. "It feels like it's being driven by law enforcement and anti-drug folks." The threat of stepped-up federal prosecutions could accomplish what city and district attorneys have so far struggled to achieve. The prosecutors are targeting landlords who rent to marijuana operations and could lose their property through civil forfeiture. "That hits right in the sweet spot because it deals with money," Birotte said. The tactic was employed by the Bush administration in 2007. Many dispensaries were forced by landlords to move, but — able to pay top-dollar rents in a lousy economy — they easily found new locations. But Birotte said that this time, prosecutors intend to follow through with forfeitures. To underscore that, he announced that he has filed lawsuits to seize buildings in Wildomar, an unincorporated part of Montclair and Lake Forest. The Lake Forest strip mall has eight dispensaries. The state's four federal prosecutors have each also sent dozens of warning letters. Birotte has focused on 38 dispensaries in 13 cities where dispensaries are not allowed and where local officials have pleaded for help. He gave them two weeks to start ending pot sales. In Northern California, the prosecutor is focusing on pot stores within 1,000 feet of schools and playgrounds, an approach that could threaten many dispensaries in dense Bay Area cities. The prosecutors also announced some indictments. Birotte said an indictment unsealed this week seeks the forfeiture of $14.7 million, accusing six people linked with NoHo Caregivers in North Hollywood of dealing in up to 700 pounds of marijuana a month and selling to affiliates in New York and Pennsylvania. "They're showing their muscle: 'Here we are, we're here, we're coordinated, you guys better watch out,'" said Matt Kumin, a lawyer who specializes in medical marijuana. "The total amount of cannabis that is cultivated in California is not going to go down. It just goes back underground." Birotte said the new strategy was not triggered by any specific event but was inspired by a stream of complaints from California law enforcement officials. The crackdown announced Friday came after months of consultation between the U.S. attorneys and Justice Department officials in Washington. The prosecutors acknowledged that they are not getting more money or prosecutors. Steve Cooley, the Los Angeles County district attorney, predicted that intense coordination with federal prosecutors would make a huge difference. "It's advancing in the right direction from our perspective," he said. In Los Angeles, Jane Usher, a special assistant city attorney, said her office intended to work closely with Birotte's. "We're gratified that they see what we see, which is what began as an opportunity to help seriously ill patients has evolved into storefront drug sales and trafficking," she said. California's attorney general, Kamala Harris, declined to discuss the announcement. Her office is revising the medical marijuana guidelines that Jerry Brown issued in 2008 when he was attorney general. Those guidelines note that state law does not allow "collectives, cooperatives or individuals to profit from the sale or distribution of marijuana" and advises that storefront dispensaries "may be legal." Medical marijuana advocates were also perplexed that a federal department reporting to Obama is launching a crackdown that promises to be more fearsome than any under former President Bush. They believe that Obama betrayed a commitment he made as a candidate who casually joked about smoking marijuana and has strayed from the issues he was elected to address. "They're wasting money they don't have," Leno said. "This is not the issue of the day. This doesn't create jobs. This does not keep the security of the nation intact. It doesn't clean the environment." Leno said he believed the Obama administration has missed an opportunity to end the 15 years of legal chaos that began in 1996 when California voters passed Proposition 215. "If anything, they should be demonstrating leadership in resolving the conflict between federal and state laws," he said. "Until we deal with that, we're going to be going around in circles here." john.hoeffel@latimes.com
Surrender Hell!!! I Didn't!!! I'm just gearing up for the next Civil War. Only it won't be North versus South this time!!! It'll Be Red State Versus Blue State!! Liberal Socialists Versus Responsible Conservatives!!!
I agree with the above article that states that it's a huge business. A lot of the dispensaries are raking in cash, even though it was supposed to be non-profit. I love the prop 215 and 420, which together legalized the use and non profit sale of cannabis with a doctor's prescription. It was a great bit of legislation, and should have done great things. Unfortunately, the same people who were growing and selling drugs before are now selling medicine.
the term non-profit only covers the business it doesnt say the employees can get rich look at how ins cos work, bluecrosss dont make any money at all the bigshits behind the top floor desks do tho
Basically that is what is happening here. I don't think that should work for insurance companies, nor do I think it should work for Medical Cannabis. Then again, it is a weed, and people should just grow it themselves, and it's basically free. The dispensaries paid $100,000,000 in sales tax last year.
Insurance companies are not non-profits. And the only reason for making it illegal to profit on the growing/distribution of medical marijuana is to make it more difficult for patients to obtain. Can you imagine if they made it illegal to profit from the maufacture/distribution of pain pills? All medication?
