Pubdate: Wed, 27 Apr 2011
Source: Denver Post (CO)
Copyright: 2011 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122

CLEAR THE AIR ON U.S. POT POLICY

The federal government is sending mixed messages about 
state-sanctioned medical marijuana with its IRS audits.

The Internal Revenue Service's audits of medical marijuana businesses 
in Colorado and elsewhere around the country seem to be within the 
agency's legal authority, but prompt a larger question for the Obama 
administration.

What is the federal government's over-arching policy on 
state-approved medical marijuana activity?

The Justice Department issued a directive in 2009 saying federal drug 
enforcement resources wouldn't be used to prosecute medical marijuana 
interests clearly acting within the frameworks established by states. 
That directive, partly, caused the industry to boom in Colorado.

Yet the IRS reportedly has begun auditing dozens of medical marijuana 
businesses, pursuing a clause in the federal tax code prohibiting 
businesses trafficking in Schedule I or II drugs from taking business 
tax deductions.

We've had our issues with the medical marijuana industry, but those 
involved deserve a consistent answer as to how the federal government 
views them.

The medical marijuana business is a risky one, since marijuana use 
and distribution remain illegal at the federal level. There is always 
the possibility the Justice Department could change its views - and 
with the recent letter from Colorado's U.S. Attorney John Walsh, it 
appears they are at least refining their views of what's acceptable - 
or that a new president would backtrack on the directive Attorney 
General Eric Holder issued. It advised U.S. attorneys that the 
Justice Department should not go after people with cancer using 
medical marijuana as part of a recommended treatment regimen that 
complies with state law.

"As a general matter, pursuit of these priorities should not focus 
federal resources in your States on individuals whose actions are in 
clear and unambiguous compliance with existing state laws providing 
for the medical use of marijuana," it said.

However, Justice would continue to prosecute "significant 
traffickers" of illegal drugs, including marijuana. Commercial 
enterprises that unlawfully marketed and sold marijuana for profit 
would remain an enforcement priority.

The IRS should issue similar guidance, giving medical marijuana 
businesses a clear heads-up as to how the agency views their tax obligations.

Would medical marijuana businesses be better off not taking business 
tax deductions?

That surely seems to be the case, given the agency's tack in 
California. A tax attorney told The Denver Post that the IRS has 
undertaken some 30 dispensary audits there.

We have had a fundamental problem with Colorado's medical marijuana 
"industry" for some time now, especially since voters never signed 
off on a full-blown dispensary system when they approved a 
constitutional change allowing for medical pot.

However, if the Obama administration is changing its position on how 
it views dispensaries - especially after the state has created a 
regulatory framework that allows them to exist - the federal 
government needs to clearly articulate that position so everyone 
knows the rules.  
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MAP posted-by: Richard Lake