Increased legalization of marijuana at the state level has led to the rapid growth of marijuana production and distribution companies. These companies have to deal not only with the normal federal tax consequences of running a business but also with the unique federal tax consequences of running a business that is technically illegal under federal law. As a result, these companies require sophisticated tax guidance. However, it would likely be a crime under the Money Laundering Control Act of 1986 (the “Act”) for a tax practitioner to receive payment for providing a company that produces and sells marijuana in the United States with legal advice or representation in connection with non-criminal matters. The Act therefore has a chilling effect on the ability of marijuana companies to receive the robust legal advice and representation they require. In this article, we explain how the Act works as applied to civil tax advice and representation and consider avenues that might allow practitioners to advise or represent state level marijuana companies without running afoul of the Act.
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Please note that this article is a TAXES – The Tax Magazine publication.
Ethan Kroll is a partner in the Los Angeles office and a member of the Firm's Tax Practice Group. He co-authors a regular column on international tax developments in TAXES – The Tax Magazine, contributes regularly to the Tax Management International Journal's Leading Practitioner Commentary, and speaks frequently on international tax issues. Previously, he was a principal at a Big Four accounting firm.
Sonya C. Bishop
Sonya is an associate in Baker McKenzie’s Global Tax Practice Group in New York. She advises clients on litigation and administrative tax controversies. Before joining Baker McKenzie, Sonya served as a judicial law clerk for the Hon. Richard T. Morrison and the Hon. Christian N. Weiler of the US Tax Court.
Stewart R. Lipeles
Mr. Lipeles practices in the area of corporate tax law, with an emphasis on international tax planning. He joined the firm in 1996 and became a partner in 1999. From 1993 to 1996, Mr. Lipeles was an associate at the law firm of Jenner & Block. From 1994 to 1996, he was also an Adjunct Professor at IIT/Chicago Kent College of Law, where he taught classes on International Taxation and other subjects. Mr. Lipeles served as a law clerk to the Honorable E. Grady Jolly of the U.S. Court of Appeals, Fifth Circuit in 1992 and 1993.
Julia Skubis Weber
Julia Skubis Weber is a partner in Baker McKenzie’s Global Tax Practice Group in Chicago. She has been advising US, non-US and multinational corporate and pass-through clients on federal income tax planning matters since 2005.