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Who’s Afraid of Code Section 280E?

This article referenced in this post was originally published in Volume 99, Issue 11, of CCH’s Taxes—The Tax Magazine (November 2021). In the November 2021 edition of International Tax Watch in TAXES – The Tax Magazine, Tom Firestone, Scott Frewing, Ethan Kroll, Erika Van Horne, Stewart Lipeles, and Julia Skubis Weber explore the U.S. international tax implications of section 280E, concluding that section 280E should not disallow deductions for expenses U.S. persons incur in connection with: maintaining cannabis IP in, and licensing that IP from, the United States;engaging in cannabis R&D in the United States; andassisting with and overseeing from the United States non-U.S. operations that manufacture, market, distribute, dispense, and sell cannabis products outside the United States, where it is legal to do so. They also determine that section 280E should not disallow deductions against tested or subpart F income for expenses CFCs incur in connection with manufacturing, marketing, distributing, dispensing, and selling cannabis products outside the United States, where…

USDA Issues Final Rule for Hemp Production

The U.S. Department of Agriculture (“USDA”) released on January 15, 2021, a final rule package designed to serve as the framework for a U.S. hemp industry that gained federal legal status a little more than two years ago. The 301-page package delivers some changes from an October 2019 interim final rule that provided initial guidelines to implement the 2018 Agriculture Improvement Act (known colloquially as the “2018 Farm Bill”). The 2018 law removed hemp from the Controlled Substances Act and set a legal definition for hemp as 0.3 delta-9-tetrahydrocannabinol (“THC”) on a dry weight basis. The final rule package, which takes effect March 22, 2021, provides steps for the USDA to review and approve plans submitted by state, territorial and tribal governments for regulating hemp production. The rule also lays out how the USDA will regulate farmers in states or tribal lands that have not outlawed hemp but also have not submitted plans. The finished regulations come after 5,900 public comments…

The Future Of Drug Decriminalization After Oregon

This article was originally published by Law360 on December 16, 2020. On Nov. 3, Oregon passed Measure 110, a novel law[1] that reclassifies personal or noncommercial possession of controlled substances such as heroin, cocaine and methamphetamines, from a Class A misdemeanor to a Class E violation, punishable only by a $100 fine.[2] It also establishes a drug addiction treatment and recovery program funded in part by the state’s marijuana tax revenue and state prison savings.[3] In 1973, Oregon was the first state to decriminalize possession of small amounts of marijuana. Could Measure 110 be the first step to legalization of cocaine and heroin throughout the U.S.? Similarities to Marijuana Reform The broader drug decriminalization movement grows out of, and shares many similarities with, the marijuana reform movement. Like marijuana reform, it is driven by sophisticated, organized, long-term policy advocacy. For example, according to Ballotpedia, the largest contributor to the Measure 110 campaign was the Drug Policy Alliance, or DPA, which contributed over…

This article may also be found at https://www.law360.com/articles/1333792/2020-election-may-mark-a-turning-point-for-marijuana-law.

2020 Election May Mark A Turning Point For Marijuana Law

This article was originally published by Law360 on December 2, 2020. “You have a row of dominoes set up, you knock over the first one, and what will happen to the last one is the certainty that it will go over very quickly.” —Dwight D. Eisenhower What did this election do for the marijuana industry? A lot. Four states — three traditionally red — voted to legalize recreational marijuana while a fifth, one of the reddest, voted to legalize medicinal marijuana. These reforms will likely create a domino effect, leading other states to reform their laws and will likely also force change at the federal level. In short, the elections could mark a turning point for marijuana law and policy throughout the United States. What the States Did Three traditionally red states, Arizona, Montana and South Dakota — plus New Jersey — voted to legalize recreational marijuana, while Mississippi voted to legalize medical marijuana. In Arizona, marijuana reform received approximately 300,000…

SAR Filing and Ancillary Businesses

The Bank Secrecy Act (“BSA”) implementing regulations at 31 CFR Chapter X require covered financial institutions to file reports of suspicious transactions with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) in circumstances where the bank knows, suspects, or has reason to suspect that the transaction “involves funds from illegal activities.”  The requirement to file such suspicious activity reports or “SARs” arises under federal law.  Marijuana-related business activity that has been legalized under certain state laws—e.g., recreational cannabis dispensaries in Colorado—remains illegal under the federal Controlled Substances Act.  The conflict between state and federal law is, in the words of Attorney General William Barr, “intolerable.” But thanks to FinCEN guidance, banks’ SAR filing obligations with regard to so-called “plant-touching” customers are relatively clear.  But what about so-called “ancillary businesses” that only service plant touching businesses?  Here, the situation is much less clear. FinCen’s 2014 Guidance FinCEN published guidance in 2014—”BSA Expectations Regarding Marijuana-Related Businesses”—to clarify that “the obligation to…

FDA Draft Guidance for Clinical Research of Cannabis and Cannabis-Related Products

On July 21, 2020, the U.S. Food and Drug Administration issued its draft guidance on clinical research for the development of drugs that contain cannabis or cannabis-derived compounds of botanical origin (as opposed to synthetic). The draft guidance isentitled “Cannabis and Cannabis-Derived Compounds: Quality Considerations for Clinical Research, Draft Guidance for Industry.”  The guidance provides some clarity on the use of cannabis in clinical research in light of the changes made by The Agriculture Improvement Act of 2018, Public Law 115-334 (the 2018 Farm Bill) which federally legalized hemp and cannabis derivatives that contain no more than 0.3 percent THC on a dry weight basis.  Specifically, the draft guidance outlines the FDA’s “current thinking” on: (1) the source of cannabis and cannabis-derived compounds for clinical research; (2) quality considerations for developing drugs that contain cannabis and cannabis-derived compounds; and (3) how to calculate the THC percentage in botanical raw materials, extracts, and finished products. Source of cannabis and cannabis-derived compounds The draft guidance…

Why DOJ Released a Confidential Memo on Marijuana Research

The Department of Justice recently took the extraordinary step of releasing a previously confidential memo from its Office of Legal Counsel concluding that DEA’s long-standing policy on marijuana research violates federal law and U.S. treaty obligations. Why did DOJ do this? What does the memo mean for the future of marijuana research? In this podcast, Matt Zorn and Shane Pennington, the lawyers who litigated this case, explain how they got DOJ to release the memo and what it all means. Global Cannabis Compliance Podcast · Podcast Episode 5

FBI Uses Undercover Agent to Expose Alleged Corruption in State Licensing

In August, the FBI announced that it would be focusing on public corruption in state marijuana licensing. In September, the Mayor of Fall River, Massachusetts was indicted for extorting more than $250,000 in bribes from cannabis businesses in return for assistance with licenses.  In October, alleged Rudolph Giuliani associates Lev Parnas and Igor Fruman were indicted for, among other things, a scheme to make illegal campaign finance donations in connection with a planned recreational marijuana business in Nevada.  Last week, the US Department of Justice announced charges against two officials of the city of Calexico, California (a small city about 120 miles east of San Diego) for soliciting $35,000 in cash bribes from an undercover FBI agent whom they believed represented investors seeking to open a cannabis dispensary.  As far as we are aware, this is the first time that the FBI has used an undercover agent in a case involving corruption in state cannabis licensing. California law provides local jurisdictions…

Podcast – Episode 4 – Legalization as a strategy to combat drug cartels?

Adam Schleifer is a candidate for Congress in New York’s 17th congressional district. He previously worked as an Assistant U.S. Attorney in Los Angeles where he prosecuted violent drug cartels. In this podcast, he talks about why he believes that federal legalization of marijuana would be an effective means of combating drug cartels. Please join us for a fascinating discussion. Global Cannabis Compliance Podcast · Episode 4 – Legalization as a strategy to combat drug cartels?

COVID and Marijuana Legalization: Lessons of History

The Great Depression and the need for tax revenue to fund the New Deal ended prohibition in 1933.[1] The economic fallout from the COVID crisis, according to some experts, could result in a “New New Deal,” and Senator Ed Markey (D-MA) recently said that 2021 would, like 1933, have an “FDR moment.”[2] Just as the first “FDR moment” included the (re) legalization of alcohol, there are indications that the next may include the legalization of marijuana. The COVID crisis has again highlighted fundamental tensions in marijuana law and policy in the United States. Several states have declared marijuana businesses “essential” and therefore exempt from mandatory shutdown orders. But at the same time, marijuana businesses are ineligible for CARES Act relief because of a Small Business Administration policy which prohibits assistance to all marijuana businesses, because they operate in violation of federal law. This apparent incongruity has sparked renewed Congressional interest in marijuana reform. On April 17, a bipartisan group of 34…