California Inititative Would Help Medical Marijuana Dispensaries Fight Back Against ‘Hostile’ IRS

A new voter initiative in California to legalize and regulate the general use of marijuana could help protect medical pot dispensaries from the Internal Revenue Service.

The Regulate Marijuana Like Wine campaign seeks to repeal prohibition of marijuana for adults, place strict state oversight on the drug and allow hemp agriculture.

While the overall effects of such an initiative on the medical marijuana industry are unclear, organizers say it would give dispensaries tools to defend themselves in the event of an IRS audit.

This is a particularly significant issue for the medical pot community, as dispensaries and growers are unable to claim most of the tax breaks given to other businesses. That makes it harder to squeeze out profits, and it puts marijuana dispensaries at a huge disadvantage.

The situation has been murky for quite sometime, and some dispensaries have been able to claim the tax breaks yet avoid an audit. But late last year, the IRS came down hard on Harborside Health Center in California, one of the largest and most successful dispensaries in the country. The IRS ruled that Harborside cannot claim standard business tax deductions because cannabis is an illegal drug. As a result, the IRS told Harborside that it owes several million dollars in additional taxes for years in which it claimed those deductions.

The Regulate Marijuana Like Wine (RMLW)  initiative, however, includes five measures that could help dispensaries fight back against the IRS.

Under the proposed law:

#1. California would remove cannabis from its list of controlled substances. Dispensaries could therefore “argue in federal court that since cannabis is no longer a controlled substance in your home state, the court must conclude that there is reasonable doubt regarding the accuracy of the listing cannabis on the federal schedule.”

#2. The state would notify the feds that Californians want to remove marijuana from the federal controlled substances list. It’s an important part of the measure, as “the People of California have supremacy over a federal agency, on issues of health and safety, even if it is the DEA,” according to RMLW organizers.

#3. California would have to defend the initiative at the local, state and federal levels, providing defense attorneys with ample resources and a sizable budget.

#4. State employees would be prohibited from cooperating with federal authorities in cases involving individuals or dispensaries that are in full compliance with state marijuana laws.

#5. Individuals would be granted civil rights to possess, use, cultivate and sell marijuana – which organizers say would thwart the IRS.

Organizers behind RMLW are trying to get as much support for the move as possible, so it’s not surprising that they would try to get dispensaries on board by highlighting how it could help them.

The campaign got off to a fast start last fall, with organizers collecting more than 10,000 signatures in the first two weeks. The total stood at about 20,000 earlier this month. The goal is to get enough valid signatures to qualify the initiative for the fall ballot.