The Republican tax reform bill currently being debated in the U.S. Senate may end up including a repeal of 280E for state-licensed marijuana companies if a last-minute bipartisan amendment makes it into the legislation.
The amendment – offered by Republican U.S. Sen. Cory Gardner of Colorado – would essentially exempt cannabis companies from 280E as long as they’re in full compliance with state laws.
It’s a version of the Small Business Tax Equity Act, which was originally sponsored in the House by Florida Republican Carlos Curbelo and in the Senate by Oregon Democrat Ron Wyden.
The 280E provision of the federal tax code has long been the financial bane of marijuana companies that have been trying to play by the rules while also turning a profit.
The provision prevents MJ companies from taking standard federal tax deductions that are allowed for every other legal industry, so cannabis businesses typically end up paying a 70%-90% federal tax rate.
A number of pro-marijuana industry groups were hard at work Thursday lobbying senators to support the amendment, as the upper chamber went into what will likely be the final days of debate on the tax bill before a final vote.
“To help this amendment succeed, senators need to hear from you!” the National Cannabis Industry Association (NCIA) wrote in an email blast to its members.
Neal Levine, chairman of the marijuana industry organization the New Federalism Fund – which has been working almost exclusively on a 280E repeal for the MJ industry – said the amendment “has a real chance to pass,” in large part because of bipartisan support from members of Congress.
By contrast, NCIA’s director of government relations, Michael Correia, said he was “hopeful” about the amendment’s chance and said it would be a heavy lift politically to get enough votes.
“It’ll be a challenge to see if we can get 51 senators to support this,” Correia said.
Americans for Tax Reform, headed by the conservative anti-tax crusader Grover Norquist, is also throwing its support behind Gardner’s amendment and is lobbying senators to back the measure, sources told Marijuana Business Daily.
The Michigan appeals court again has reversed a decision and reinstated charges against a man who was accused of running illegal medical marijuana dispensaries in the state’s Thumb region.
The court says James Amsdill knew the legality of marijuana sales was unclear and was also aware that state police didn’t view his Blue Water Compassion Center as legal. The court says, “Prosecution is more than fair under the circumstances.”
A judge in St. Clair County twice dismissed the case, the last time on grounds of entrapment. The case was filed in 2013, long before Michigan lawmakers created a system to allow certain marijuana dispensaries to operate legally.
Licenses could be issued by spring.
Copyright 2017 Associated Press. All rights reserved.
Setting up ridiculously difficult requirements for licensing eligibility prioritizes the high profits of a few over industry efficiency, true competition, and patient/consumer rights.
State-sanctioned medical marijuana operational licenses are increasingly becoming a “pay-to-play, greatest barrier to entry” model. In this sort of system, there is usually some combination of the following, all geared towards minimizing the number of licensed cannabis businesses and towards making sure all those who get such licenses are very well-funded:
A difficult and time consuming license application process;
High application fees;
An unreasonably short application window; and
High minimum funding requirements.
To varying extents, Florida, Illinois, New York, Hawaii, Minnesota, and Nevada all have this sort of legalization regime.
Florida. In Florida, only five agricultural nurseries that have been in existence for at least the last thirty years were even eligible to be licensed as dispensing organizations under the state’s extremely limited medical marijuana program. From the few nurseries that qualified, the state prioritized financials in its scoring process and required all of the nurseries to post a $5 million dollar performance bond. In other words, if you weren’t a large and well-funded nursery that has been around for 30-plus years, forget about it. These five nurseries have nearly unfettered access to Florida’s population of 20 million and there’s a chance these five nurseries could end up being the sole providers of medical cannabis under Florida’s impending medical marijuana ballot initiative.
Illinois. Illinois allows only 21 cultivation centers and 60 dispensaries to serve all 13 million people in the state. Illinois set up a point system for judging cannabis licensing applicants based on their proposed security plans, their expertise in growing marijuana, and their plans for patient education. Cultivation centers were required to pay $200,000 for an initial license and have at least $500,000 in liquid assets, in addition to a non-refundable $25,000 application fee. Dispensaries were required to pay $30,000 for a license and have $400,000 in liquid assets, in addition to a non-refundable $5,000 application fee.
New York. Start-up costs for running a medical cannabis company in New York were estimated at around $25 million. The state required a $10,000 non-refundable application fee, plus a $200,000 refundable registration fee for each application. Those seeking a cannabis license also had to show they had the real estate necessary to produce cannabis or be able to post a $2 million bond. Only five operators are allowed to run up to 20 dispensaries throughout the state, and applicants had to produce a litany of documents for the state’s Department of Health that described, in detail, the applicant’s manufacturing processes, transporting, distributing, sale and dispensing policies or procedures. Not as exclusive as Florida, but that’s 20 dispensaries for 20 million people.
Hawaii. Hawaii kicked off its new MMJ legalization regime with a five-year residency requirement and the requirement that its MMJ companies be majority-owned by Hawaiians. Hawaii has some of the toughest, most protectionist cannabis regulations and barriers to market entry in the country. It is set to have only 16 dispensaries in the state, and business applicants also needed to show $1,000,000 “for each license applied for,” and “not less than $100,000 for each retail dispensing location,” all of which had to be under the control of the applicant for no less than 90 days prior to the date of application. There was also a $5,000 non-refundable application fee for each license. Applicants awarded with licenses had to pay $75,000 for each license within a week of approval. Dispensary licensees must also pay an annual renewal fee of $50,000.
Minnesota. Minnesota has an extremely limited medical cannabis program. First, only two operators serve the entire state for cultivation, manufacturing, and distribution. The two operators each operate four dispensaries in the state, for a total of eight. The two operators were selected after the state reviewed their personal histories and capabilities with respect to cultivation, manufacturing, and patient services — these folks even had to commit to having a licensed pharmacist on staff to distribute the cannabis (which makes little sense since cannabis cannot be legally prescribed). And, of course, the state also assessed their financial stability and business plans. One of the operators, Leafline, reportedly raised $12.4 million in investment from 113 investors. All of this for a state that, at the time, claimed to have only 5,000 registered qualifying patients.
Nevada. In Nevada, running a marijuana business is like running a casino — it’s capital-intensive and only a select few get to participate. Nevada requires local control of its cannabis businesses and its license applicants needed to show no less than $250,000 in liquidity. They also had to produce volumes of documents showing detailed floor plans, security, personnel manuals, and even advertising and marketing plans, all of which were scored against a strict point system. In addition, the application fee was a non-refundable $5,000, and the license issuance fee (per license) is $30,000.
All of the above states have created massive barriers to entering into their medical marijuana industries. On the flip side, all four states (Colorado, Washington, Oregon, and Alaska) that legalized recreational marijuana do not have nearly the barriers to entry as these medical states.
Though it makes sense for states to want to closely hew to the priorities set forth in the 2013 Cole memo, setting up ridiculously difficult requirements for licensing eligibility prioritizes the high profits of a few over industry efficiency, true competition, and patient/consumer rights. The medical marijuana states have set up uneven playing fields that give the already wealthy near monopoly power over medical cannabis. How is this a good system for anyone but the few who have bestowed with the spoils?
I can only hope that Colorado, Washington, Oregon, and Alaska will eventually serve as models in in showing how letting the marketplace choose cannabis winners and losers is preferable to patronage systems with high barriers to licensing. So far, these recreational-legal states are proving that market entry equality and the priorities set forth in the Cole memo can be squared.
States that have legalized medical marijuana could soon get an unwanted visit from the DEA. Yesterday, Congress stunned the cannabis industry by rejecting the only legal protection preventing Attorney General Jeff “good people don’t smoke marijuana” Sessions from cracking down on those 30 states for violating federal cannabis prohibition.
Back in 2014, lawmakers passed an amendment to the federal budget to protect state-legalized medical marijuana industries and the patients they serve. The amendment prevented the DEA from spending a single penny on enforcing cannabis prohibition in those states. It didn’t overturn federal cannabis prohibition or legalize medical marijuana, but it did tie the Department of Justice’s hands by freezing their finances.
At the time, medical marijuana was legal in 21 states, a number that has grown to 30 since then. But they could all be shuttered soon because that amendment — which has to be renewed with every budget — was rejected yesterday by the House Rules Committee. That means the House can’t include the rider in their final version of the federal budget.
If the budget passes without that rider, budtenders, dispensary owners, doctors recommending cannabis and even medical marijuana patients could face prosecution for their involvement in the industry. And not just for what they’re doing right now. They could be charged with offences dating back to when they got involved in the state’s cannabis industry.
And Attorney General Sessions might do just that since he’s been itching to crackdown on those states. Since taking office, Sessions has ramped up anti-marijuana rhetoric in America. And last May, he asked Congress to drop the amendment so that he could unleash the DEA on medical marijuana states if he saw fit. His request was denied in July by the Senate Appropriations Committee, but it seems like his message resonated in the House.
The fight for the marijuana amendment isn’t over yet though. The budget has yet to reach the Senate, where the rider could be re-inserted with support from Senators Cory Booker (D – NJ), Mike Lee (R – UT), Lisa Murkowski (R – AK), Rand Paul (R – KY), Bernie Sanders (D – VT) and others.
But even if it does get reinserted and passed, the amendment only buys patients, doctors and businesses a small window of relief before they have to start looking over their shoulders for DEA helicopters again. The reality is that the industry won’t be safe until Congress listens to the 94 percent of Americans who support medical marijuana and changes the country’s criminally outdated cannabis laws.
It is a complex and changing area of law. We know that federal law (18 U.S.C. § 922(g)(3)) makes it a felony for an “unlawful user of … any controlled substance” to “possess … any firearm or ammunition.”
Marijuana is classified as a Schedule I controlled substance, so it is a felony for a user of marijuana to possess a firearm or ammunition. Juxtapose this with the fact that 28 states and the District of Columbia have now passed laws legalizing the medicinal and/or recreational use of marijuana.
The main question we get is: “I have a MMMA Card, can I still get a CPL and own and possess firearms?”
To get a License to Purchase a pistol or a Concealed Pistol License in Michigan, you must also pass a federal background check (NICS check). This brings federal law into the Michigan scheme of licensing. The ATF takes the position that anyone with a MMMA card is probably using and therefore they are not allowed to possess a firearm until 12 months after their last use. So, even having a card is a prohibitor in the eyes of the federal government.
Some argue that this may be a leap as a person with a MMMA card may not use marijuana the same as a CPL holder may not ever carry a pistol. The federal law has been challenged and been upheld so far. Courts have, without any real empirical evidence, assumed a connection between marijuana use and gun violence.
The Michigan database on who has a MMMA card does not talk to the State or Federal databases that are used for background checks. So, unless the person admits they have the card there is no real way for anyone to find out.
But you must fill out certain forms when you apply for a License to Purchase or CPL and you are stepping into a grey area when the marijuana question must be answered. Hopefully, we will get some clarity from new legislation or court cases in the future to make this interaction between laws more sensible.
More information about medical marijuana and firearms ownership can be found HERE.
About MCRGO:
The Michigan Coalition for Responsible Gun Owners is a non-profit, non-partisan organization. Formed from just eight people in 1996, we now have thousands of members and numerous affiliated clubs across the state. We’re growing larger and more effective every day.
Our mission statement is: “Promoting safe use and ownership of firearms through education, litigation, and legislation” Visit: www.mcrgo.org.
We know where marijuana law and access in Michigan is going in the short term. Two recent legal developments have laid it out.
The first development is that there will be no vote on legalizing recreational use of marijuana on this year’s ballot. It’s been lingering on life support as MI Legalize went through various legal challenges and appeals in the state courts to get the signatures on their petitions counted. But it died when the state Supreme Court refused the case. There is still a federal challenge to the state decision, but even if there were a win down the road on that front, it wouldn’t happen in time for a vote this year. A federal judge denied a motion to stop the printing of ballots for this year’s election.
Not that MI Legalize has given up the effort. The organization is pursuing a federal appeal. At the same time the group is reorganizing — with lessons learned — for an attempt to get on the ballot for 2018, a gubernatorial election year. Presidential elections bring out more voters, which is what MI Legalize was hoping for, but apparently they don’t want to wait four years before calling the question again. If public opinion trends keep moving in the direction they have been, it’s a question of when, not if, marijuana will be legalized.
The second development has a more immediate impact for the 212,928 medical marijuana patients registered in the state. Gov. Rick Snyder signed Public Acts 281-283 last week, setting up the system for medical marijuana sales in the state, and possibly giving us a preview of what a recreational sales system will look like down the line. The Michigan Medical Marihuana Act (MMMA) did not specifically account for marijuana dispensaries for distribution, and some counties enforced the catch-22 of “patients may have marijuana, but there’s no place to buy it.” Now there can be dispensaries, and it is up to local municipalities whether they want to allow them or not.
PA 281, the Medical Marihuana Facilities Licensing Act, regulates the growth, processing, transport, sales, and taxation of medical marijuana. The law creates three levels for growing licenses: up to 500 plants; up to 1,000 plants; and up to 1,500 plants.
PA 282 changes the Michigan Medical Marijuana Act to allow for extracts, oils, and infused products. That was another testy point, because the MMMA specifically referred to the “dried leaves and flowers” of the marihuana plant, but not extracts made from them. State law enforcement was never comfortable with high potency substances made from marijuana extracts.
A seed-to-sale tracking system for medical marijuana — known as the Marihuana Tracking Act, or PA 283 — was tacked on later in the process with backing from business interests and law enforcement.
The laws take effect immediately, although in practical terms the only one that matters is PA 282, for patients who need oils and extracts. The practicalities of how the licensing is administered will be up to a new state-appointed board.
Getting the laws in place is an important point in a long and ongoing process. Whether they are good or not depends on who you talk to.
“When we first started approaching public officials and legislators, most of them didn’t even want to talk to us about medical marijuana,” says Robin Schneider of the National Patients Rights Association. “Many didn’t believe there was medicinal benefit at all. We spent years debating with law enforcement about regulations, the need for transporting security, and seed-to-sale tracking. The two opposite sides had to meet in the middle.”
That was spoken like a veteran of political negotiating. Schneider has spent six years working in Lansing trying to get something like these laws passed and sees them as a good thing. She’s seen the opposition up close and personal, and believes this is a major victory, particularly for patients who need extracts and oils.
The regulations do reflect something of a law enforcement approach when you look at the seed-to-sale tracking and secure transport provisions. This generates questions as to how the governor-appointed Marihuana Advisory Council will approach its duties. Will it take an oppositional or nurturing attitude to a new industry in the state?
“The bills were driven, written, and approved by the law enforcement community, which will not have the same interests in the success of the program as the dispensary people,” says attorney Michael Komorn, president of the Michigan Medical Marijuana Association. “This is a police oversight program that has nothing to do with the medical marijuana act. It’s a license that is supervised by the law enforcement team akin to the liquor control system.”
At the very least, the new laws add layers of bureaucracy to the distribution of medical marijuana, which was expected. It also regulates where some of the money in a lucrative new industry will go. Dr. Gary Wolfram, a Hillsdale College economist, has given a conservative estimate that the state will collect $63 million annually in fees and taxes, while generating about 10,000 jobs.
The money involved helps draw in those reluctant to engage with marijuana. With tight budgets and reluctance to raise taxes, this is an opportunity for state resources. It also draws in others who want to get a piece of that financial action. Will there be a level playing field for anyone to join in? Or will it be stacked toward those who are — for lack of a better reference — friends of the governor?
“I’m still skeptical of this legislature and their plans,” says Jamie Lowell of the Third Coast Compassion Club in Ypsilanti, the first licensed dispensary in Michigan. “How will the state actually treat this process? I’m a little paranoid. I’ve seen enough shenanigans and tomfoolery to have legitimate questions.”
Lowell is active with the MI Legalize group and is feeling the sting of the state legislature’s action to block the legalization petitions, such as a law passed last spring that kept all the signatures collected from being counted.
Not everybody is holding hands and singing the praises of these laws. But they are adding some definition to contested provisions of the MMMA that have led to legal problems and even imprisonment for some. At least the question of whether dispensaries are legal in Michigan is settled. They are.
“I think it’s a good thing anytime you get a little more regulation and a little more transparency,” says Julius Dubose, founder of Dubs Apothecary, a self-described mobile facility that has had its wares at medical marijuana events in Detroit. Dubose wants to open a storefront facility soon. The new laws make that possibility much more clear.
“I’m open to any municipality that will allow it,” Dubose says.
Michigan’s new medical marijuana laws may not be the most enlightened, but they do provide more clarity for those who want to operate dispensaries and produce extracts. And for most, just knowing what the rules are will make a difference.
