Wednesday, November 27, 2013
The question in the title of this post is prompted by this recent report from The Denver Post, headlined "Feds arrest one, seize guns and ammo in Colorado marijuana raids" about recent federal raids of medical marijuana facilities in a state now only a month away from having recreational marijuana stores. Here are the details of the latest federal intervention:
When federal agents swooped into a swanky Cherry Hills Village home last week as part of widespread raids tied to medical-marijuana businesses, they found a person inside holding a loaded gun, according to a court document unsealed Monday. By the time they were done searching the $1.3 million home Thursday, agents had collected five assault-style rifles, five handguns, a shotgun and a "large cache of ammunition," according to the document. It did not identify the person with the gun.
One person was detained and later arrested on suspicion of weapons violations, authorities announced Monday. As part of their investigation, agents had obtained an e-mailed photograph that appears to show that man, 49-year-old Hector Diaz, holding two semi-automatic rifles while wearing a Drug Enforcement Administration ball cap.
The details on the raids — disclosed for the first time Monday — come from an affidavit in the criminal case against Diaz and provide new context for the largest federal operation against medical-marijuana businesses ever in Colorado. Agents executed "approximately 15" search warrants during the raids, the affidavit states. Sources have told The Denver Post that the raids — which a search warrant shows targeted 10 men — were part of an investigation into a single enterprise that detectives believe may have ties to Colombian drug cartels.
Diaz, a Colombian national, was charged with a single count of possessing a firearm after having been admitted to the United States under a non-immigrant visa. He could face up to 10 years in prison if convicted. Appearing in court Monday afternoon, Diaz was advised of the charge against him and ordered held until at least Wednesday, when a hearing will determine whether he should be released and at which time more information about the raids will likely be disclosed.
The raids focused especially on stores, cultivation warehouses and individuals connected to the VIP Cannabis dispensary in Denver. On Sunday, an attorney for one of the owners of the dispensary sent a letter to Colorado U.S. Attorney John Walsh proclaiming his client's innocence. Attorney Sean McAllister wrote that his client, Gerardo Uribe, did nothing wrong under state law and "will be vindicated by a full review of this matter."...
The raids are not the first time, however, the people associated with VIP Cannabis have been accused publicly of marijuana misdeeds. A lawsuit filed last month in Denver claims Gerardo Uribe and two other men named in the search warrant, Luis Uribe and Felix Perez, have not made good on hundreds of thousands of dollars owed to three men for the purchases of a dispensary on East Colfax Avenue and a grow warehouse on Elizabeth Street. The suit also alleges that the Uribes and Perez were suspected of hiding profits and product from their marijuana businesses and selling marijuana out of state.
"Marijuana product is unaccounted for, proceeds from the dispensary are unaccounted for and Plaintiffs assume that the Defendants have stolen product and money from them," the lawsuit states. Another section of the suit alleges: "Plaintiffs believe that the Defendants may be transacting business with people in other states and do not want to reveal what the businesses are really making or who they are conducting business with."...
Other lawsuits also provide a glimpse into the high-dollar business of marijuana in which the raid targets were involved. A lawsuit filed this year in Jefferson County accuses businesses controlled by Luis Uribe and another person named as a target in the search warrant, Carlos Solano, of not paying up on the purchase of a cultivation facility. In a settlement reached in September, Uribe and Solano agreed to pay $90,000 to the plaintiffs.
As the title of this post hints, I think advocates for legalizing and regulating marijuana ought generally be pleased when the feds go after the most shady operators of marijuana facilities. I suspect businesses that follow the law in any industry can and do generally hope that those competitors cutting corners will get in trouble for regulatory failings. And, with respect to state-legalized marijuana industries, even advocate for a regulatory scheme instead of prohibition may still find it useful and beneficial for there to be the ever-present threat of the feds bringing a severe criminal justice hammer down on those businesses getting the most out of line.
Monday, November 4, 2013
Sentencing judge explains his view on how nationwide reforms should impact federal marijuana sentencing
The evolving landscape of state law and federal enforcement policy regarding marijuana is particularly relevant to two of these [statutory sentencing] factors, namely (1) the need for any sentence imposed “to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense,” § 3553(a)(2)(A), and (2) the “need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct,” § 3553(a)(6).....
The Court’s role is not to question, criticize, or laud the Justice Department’s new enforcement priorities or the recent enactments of state voters and legislators. These policy choices reflect an on-going effort to address a complex, difficult, and highly controversial issue. Rather, the Court’s role is simply to take note of these developments and consider them as part ofits assessment of the seriousness of these offenses. Ultimately, the Court finds that, in 2013, strict Guidelines sentences would overstate the seriousness of the underlying offenses and therefore fail “to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense.” § 3553(a)(2)(A)....
The Court also finds that Guidelines sentences in these cases would fail to address the “need to avoid unwarranted sentence disparities among defendant s with similar records who have been found guilty of similar conduct.” § 3553(a)(6). The Court construes this factor broadly, interpreting it as a command to ensure that sentences comport with the notion of equal justice under the law. The Justice Department has decided it will not prosecute certain marijuana traffickers, including large-scale commercial distributors who, in compliance with state laws and regulations, establish retail outlets that cater to recreational marijuana users in Colorado and Washington. Although the illegal enterprise in these cases is not identical to these commercial distributors — i.e., it did not comply with the laws or regulations of any state and implicated several federal enforcement priorities — it nonetheless bears some similarity to those marijuana distribution operations in Colorado and Washington that will not be subject to federal prosecution. The Court therefore finds it should use its sentencing discretion to dampen the disparate effects of prosecutorial priorities. As a result, the Court finds this factor too justifies a downward variance from the sentence the Guidelines would otherwise recommend....
Of course, these two factors are not the only ones the Court must consider under § 3553(a). Others, particularly “the nature and circumstances of the offense,” § 3553(a)(1), and“the need for the sentence imposed to afford adequate deterrence to criminal conduct” § 3553(2)(B), militate more strongly in favor of a Guidelines sentence. Indeed, the conspiracy at issue in these cases was a large, elaborate, and profitable illegal operation involving well in excess of 1,000 kilograms of marijuana. The Court therefore believes that a two-level variance from the Guidelines, which would reduce each defendant’s sentence by roughly 20 to 25%, is appropriate. Such a variance reflects national trends in the enforcement of marijuana-related offenses, while recognizing the undeniable illegality of defendants’ conduct. As it determines the sentence of each defendant in these cases, the Court will adopt this analysis, and accordingly it will grant each defendant the benefit of a two-level downward variance.
Recent related post:
- Do nationwide reforms now call for federal judges to sentence below the guidelines in all marijuana cases?
Tuesday, October 29, 2013
Do nationwide reforms now call for federal judges to sentence below the guidelines in all marijuana cases?
A federal judge said Friday he would consider lighter-than-normal sentences for members of a major suburban marijuana smuggling organization — the latest fallout of the drug's legalization in several U.S. states.
U.S. District Judge James K. Bredar noted that federal authorities announced this summer they would not pursue criminal cases against dispensaries and others legally handling marijuana in states where the drug has been legalized.
Bredar, who called the hearing to discuss the issue, said it might be more appropriate to compare the defendants in the Maryland marijuana case to smugglers of improperly taxed cigarettes rather than treat them as hardened drug traffickers. "It's a serious thing," Bredar said of the group's operation, "but it's not the same as dealing heroin."...
Friday's hearing involved defendants convicted of running a smuggling operation that imported large quantities of marijuana to Howard and Anne Arundel counties from California and New Jersey and laundering the proceeds through an eBay business located in a Jessup warehouse. Twenty-two of the 23 people charged in the case have been convicted; charges against one were dismissed.
Earlier this month, Bredar canceled all of the scheduled sentencings in the case and announced his plan to hold a hearing on changes in Justice Department policy that allow marijuana handlers such as dispensaries and cultivation centers to operate openly in states where marijuana is legal....
At issue in the Maryland case, Bredar said, is whether that shift means the government has decided the drug is less serious now than when federal sentencing guidelines were formulated. "Has the federal government changed its enforcement policy?" Bredar asked.
Assistant U.S. Attorney Andrea L. Smith said the topic was an appropriate one to discuss, but argued that marijuana remained a serious drug and noted that the case involved guns and violence. She suggested it might be more appropriate to compare marijuana dealing to trafficking in illegally obtained prescription pain pills rather than to cigarette smuggling....
And on a sliding scale of regulated substances, Bredar said, he thought marijuana had moved away from hard drugs and toward tobacco.
Sentences in federal cases are based on guidelines that take into account drug quantities and other circumstances in advising judges on the appropriate prison time. Those rules already recognize that dealing heroin is much more serious than dealing marijuana.
For example, all else being equal, a defendant convicted of dealing between one and three kilograms of heroin would face between nine and 11 years in prison, as would someone who sold between 1,000 and 3,000 kilograms of marijuana. At the same time, a cigarette trafficker would have to evade $100 million in taxes to face that length of prison sentence — a vastly greater weight in tobacco.
The guidelines are advisory and judges can take other factors into account when deciding a sentence. Bredar said he would take particular note of two of those factors when sentencing the defendants: He wants to make sure that defendants around the country are being treated equally and that the sentences reflect the seriousness of the offense....
A federal judge in Maryland handed down lighter prison sentences Monday to defendants in a huge marijuana distribution case, saying that such offenses are "not regarded with the same seriousness" as they were just a few decades ago.
U.S. District Judge James K. Bredar said the federal government's response to marijuana legalization in some states — notably the decision not to pursue criminal cases against dispensaries and others handling the drug in accordance with those states' laws — raises concerns of "equal justice."
In handing down a nearly five-year sentence, Bredar said he felt Scott Russell Segal had committed a significant crime for his role moving hundreds of kilograms of marijuana and laundering the proceeds.
But the judge used his discretion to ignore federal guidelines, which equate marijuana with harder drugs like heroin and called for Segal to receive eight to 11 years in prison. A second defendant also got a shorter sentence than called for in the guidelines. "It's indisputable that the offense is not regarded with the same seriousness it was 20 or 30 years ago when the sentencing guidelines … which are still in use, were promulgated," Bredar said.
Saturday, October 26, 2013
We’ve reached the point where there should be no surprise if a major national politician embraces marijuana legalization. Without any large-scale campaign on its behalf, surveys show that approximately half of Americans now support marijuana legalization, including 58 percent in a recent, but potentially outlying, Gallup poll. Regardless of the exact support today, marijuana is all but assured to emerge as an issue in national elections — it's only a question of how and when.
So far, neither party wants to touch the issue. The Democratic governors of Washington and Colorado didn’t even support initiatives to legalize the possession, distribution, and consumption of marijuana, even though the initiatives ultimately prevailed by clear margins. It took the administration ten months to announce — in the middle of the Syria debate — that the Department of Justice wouldn’t pursue legal action against Washington and Colorado. And on the other hand, Republicans weren't exactly screaming about hippies and gateway drugs, either.
Despite their apparent reservation to engage the issue, it’s hard to imagine Democrats staying on the sidelines for too many more election cycles. The party’s base is already on board, with polls showing a clear majority of self-described Democrats in support....
To date, Democrats haven’t had many incentives to take a risk on the issue. Democrats are already winning the winnable culture war skirmishes, at least from a national electoral perspective, and they have a winning demographic hand. And let’s get perspective: Marijuana legalization may be increasingly popular, but it’s not clearly an electoral bonanza. Support for legalization isn’t very far above 50 percent, if it is in fact, and there are potential downsides. National surveys show that a third of Democrats still oppose marijuana legalization. Seniors, who turnout in high numbers in off year elections, are also opposed. Altogether, it’s very conceivable that there are more votes to be lost than won by supporting marijuana. After all, marijuana legalization underperformed President Obama in Washington State.
Even so, Democratic voters will eventually prevail over cautious politicians, most likely through the primary process. Any liberal rival to Hillary Clinton in 2016 will have every incentive to support marijuana legalization. Whether Clinton will follow suit is harder to say, given that frontrunners (and Clintons) are generally pretty cautious. It’s probably more likely that Clinton would endorse steps toward liberalization, like weaker criminal penalties and support for the legalization experiments in Washington and Colorado.
Republicans, meanwhile, are less likely to support legalization or liberalization. To be sure, some Republicans will. They can take a states’ rights position and the party has a growing libertarian bent, perhaps best exemplified by Rand Paul’s willingness to support more liberal marijuana laws. Republicans also have electoral incentives to lead on issues where they can earn a few votes among millennials, who pose a serious threat to the continued viability of the national Republican coalition. If the Republicans can't adjust their existing positions to compensate for demographic and generational change, which (for now) it appears they cannot, then perhaps taking a stance on a new issue, like marijuana, is the best they can do.
Of course, the problem is that a majority of Republicans are opposed to legalization. Two thirds of Republicans voted against legalization in Colorado and Washington, where one might expect Republicans be somewhat more amenable than the nation as a whole. It probably doesn’t help that marijuana is closely aligned with the liberal counterculture. It's also possible that many pro-legalization conservatives don't identify as Republicans at all, but instead might be independents....
With Republicans likely to remain opposed, marijuana could emerge as a big cultural issue in the 2016 election. In particular, Clinton would be well-positioned to deploy the issue. Her strength among older voters and women mitigates the risk that she would lose very much support, while legalization could help Clinton with the young, independent, and male voters who could clinch her primary or general election victory.
But realistically, Clinton or another Democrat won't campaign on marijuana legalization. For one, it’s most likely that the Democratic nominee will support incremental measures....
It’s easier to imagine marijuana playing a role in the 2016 primaries. Many candidates will have incentives to use the issue, whether it’s a cultural conservative using marijuana to hurt Rand Paul among evangelicals in Iowa, or a liberal trying to stoke a progressive revolt against Clinton’s candidacy. And once one party begins to debate the issue, the other will almost certainly be confronted by the same question. Marijuana won’t be decisive in a primary, but 2016’s primary battles will shape the two party’s initial positions on the issue.
Yet marijuana’s big moment will probably come later, perhaps in 2024. Legalization might eventually be popular enough for Democrats to use the issue in general elections, first at the state level and then nationally. As with gay marriage, the GOP’s obvious but difficult solution is to take their own creed on states’ rights seriously, and devolve the issue — and the politics — to the states. Compared to gay marriage, which strikes at the heart of the evangelical wing of the party, it should be easier for the Republicans to make an adjustment on marijuana. But if they cannot, the GOP will again find itself on the losing side of the culture wars.
I see lots and lots of merit to this analysis, and I find especially intriguing the cogent observation that a older female politician like Hillary Clinton might be especially well positioned to experiences far more political benefits than costs from pro-marijuana reform positions. (Indeed, I have been thinking for some time that the marijuana reform movement needs a prominent female (and motherly) face and voice comparable to Pauline Sabin, the first woman to sit on the Republican National Committee, who was a vocal advocate from repealing alcohol prohibition 80 years ago.)
But I think this commentary may be missing one key reality that I am certain will impact dramatically the politics of pot over the next few cycles: the reality and perceptions of what ends up happening, good or bad, in Colorado and Washington as recreational pot goes mainstream in these two distinct states. If legalization is seen as a huge success inside and outside these states over the next 12 months, especially in swing-state Colorado, we should expect marijuana reform supporters to see positive political possibilities as early as 2014. But if things go poorly in these states, the reform politics necessarily will take on a much different character.
Labaoratories of democracy, here we come: buckle up local, state and national politicians, we are likely in for a bumpy and unpredictable politicial ride.
Thursday, October 3, 2013
As you likely read, yesterday the FBI shut down Silk Road (reported here via LA Times), an online marketplace for illegal drugs, after a lengthy investigation turned up evidence of hit men and obviously lots of illegal drug transactions. The reaction from users of the site (e.g. here) raises somewhat interesting issues relating to the impact of marijuana prohibition (and drug prohibition more broadly) on public health and safety.
Silk Road provided two major public health/safety benefits over the traditional street-level black markets for drugs. First, by eliminating the need for street deals, Silk Road provided a safer way for buyers and sellers to exchange drugs. Buyers no longer needed to venture into sketchy neighborhoods. They simply placed an order online and received the drugs in the mail. Sellers no longer had to hang out in those sketchy neighborhoods. The blight of corner dealers was at least marginally reduced as transactions moved online. This was better not just for those engaged in the drug trade, but also for the residents of drug-infested neighborhoods.
Second, Silk Road provided a marketplace where sellers could compete on the purity and safety of their products. Listings often included pictures of purity test results, with some drugs approaching Walt Walter quality levels. To the extent that we care about harm reduction, Silk Road marginally reduced the risk of harm resulting from drugs cut with dangerous substances. It also reduced the risk of accidental overdoses (on drugs other than marijuana) resulting from using drugs of uncertain potency.
Silk Road users are now lamenting the fact that they will be forced to return to buying impure drugs from street dealers in dangerous neighborhoods. While the site clearly facilitated violations of U.S. law, its success in providing a safer marketplace for drugs serves to reinforce the harms caused by drug prohibition, both to users and to those who in live in neighborhoods where drug dealers operate. Silk Road may also stand as an example of how drug markets could operate if drugs were legalized. Policymakers should consider the success of Silk Road (and the inevitable clones that will pop up to fill its place in the coming weeks) when debating drug reform.
As an aside, people who oppose reforming drug laws will likely point to the rather disgusting things that went down on Silk Road as evidence that drug prohibition is necessary. The head of the site ordered a hit on a would-be narc who threatened to blackmail him. Trade in child pornography, guns, and other contraband proliferated on the site. But these things resulted from the anonymity necessitated by drug prohibition, not from the nature of the site as a forum for buying and selling drugs. Absent prohibition, buyers and sellers on Silk Road-like sites would use bank accounts or credit cards to make purchases (similar to Ebay, to which Silk Road was often compared). This would kill the anonymity that led to unfortunate side effects.
As burning topics go, marijuana's not up there with the government shutdown. Still, it's more likely than ever before to be a topic in the midterm election, after activists in Alaska, Arizona, California and Oregon — states with medical marijuana laws already in place — announced their plans for similar ballot initiatives in 2014 to allow recreational use of the drug.
Voters in Colorado and Washington state decriminalized recreational use in 2012. And the number of states that allow medical use of cannabis is now up to 20. Although federal law prohibits the sale and possession of marijuana, the Obama administration said it will not challenge state laws regulating the drug, which has opened the floodgates for those urging its decriminalization — even though it's still classified as a Schedule I substance, defined as having a high potential for abuse, no accepted medical use and a lack of accepted safety for use under medical supervision.
In preparation for potential initiatives and pro-marijuana congressional candidates, some organizations are gearing up for the election already, led by the Marijuana Policy Project.
The group — which aims to increase public and congressional support for marijuana policy reform — has been politically active for more than a decade. In the first half of this year, MPP's PAC raised almost $41,000 and spent $20,000, according to Center for Responsive Politics data. At this rate, the PAC is on track — in an off-year — to surpass its 2012 numbers, when it raised about $78,000 and spent almost $52,000.
Campaign contributions from MPP in the last cycle came to about $31,000, with 79 percent of it going to candidates — almost exclusively Democrats. Freshman Rep. Beto O’Rourke (D-Texas) led the way, receiving $5,000, according to OpenSecrets.org.
MPP spokesman Mason Tvert estimated the PAC will spend about $100,000 by the end of the 2014 election cycle — a number comparable to its 2008 election cycle total when it spent about $118,000, the most since the PAC's existence. "It's also worth noting that our strategy has shifted over the years," Tvert said, "from supporting the few members of Congress who support marijuana policy reform, to focusing on the ever-increasing number of supportive congressional challengers."
But campaign finance isn’t the only arena in which MPP is active; it is also the top organization lobbying on the issue, with more than 72 “marijuana” mentions in filings since 2006.
The group's federal lobbying expenditures peaked in 2007 at $200,000, but has declined over the years. In the first half of 2013, it spent just $10,000, but that doesn't mean its lobbying efforts have decreased. Instead, they have been refocused toward reform at the state legislative level, hoping to move from the ground up. "(This is) an effective way to help create change at the federal level by making marijuana policy relevant to members of congress back home in the district," said Dan Riffle, MPP's director of federal policies.
Federally, MPP's efforts are focused on policy reform and sponsorship of both medical and non-medical marijuana bills that would make federal statutes more compatible with states’ legalization laws.... MPP supports the States’ Medical Marijuana Patient Protection Act (H.R. 689), which was introduced in the House earlier this year and would push marijuana under a listing other than Schedule I or Schedule II. It also would amend the Controlled Substances Act and the Federal Food, Drug and Cosmetic Act to no longer prohibit the possession, production or distribution of marijuana in states where the medical use of cannabis is legal under state law.
Thursday, September 26, 2013
House Government Operations subcomittee to examine "Federl Response to Marijuana Legislation" ... OR MAYBE NOT
Though sure to be overshadowed (and perhaps precluded) by the prospects of a federal government shutdown, on Wednesday October 2, 2013 at 10am, as noted at this official webpage, there will be Hearing before the United States House of Representatives Subcommittee of Government Operations titled "Examining the Federal Response to Marijuana Legislation."
I am inclined to suspect that this hearing will not be quite a pro-reform-oriented as the similar Senate Judiciary Committee hearing which took place earlier this month (discussed here and here and here). Yet, as this local press report notes, one of the members of this House Subcommittee, Rep. Justin Amash from Michigan, is a co-sponsor of a bill titled "Respect State Marijuana Laws Act" which aspires to prevent the feds from criminally prosecuting persons who act in compliance with state marijuana laws. Consequently, there could well be a prominent states' rights theme to this hearing.
UPDATE: A check on the House Subcommittee website linked above, the morning of October 2, 2013, now shows no record of this previously scheduled hearing. I am not sure if this hearing was cancelled because of the federal government shutdown or for other reasons, but I am intrigued and deeply disappointed this hearing is apparently no longer going to happen.
Wednesday, September 18, 2013
“Children are growing up with a total lack of respect for the Constitution and for the law," Pauline Sabin, the first woman to sit on the Republican National Committee, said in regard to prohibition in 1932. "The young see the law broken at home and upon the street," she added. "Can we expect them to be lawful?”
Sabin was the founder of the Women’s Organization for National Prohibition Reform that helped legalize the sale of alcohol. She graced the cover of Time magazine in 1932 for inspiring the movement to overturn the disastrous eighteenth amendment that helped finance Depression-era lawlessness.
Republicans could take a page from her playbook on the issue of marijuana prohibition today. With non-violent arrests occurring every 36 seconds, overcrowding our prisons, and depleting billions of dollars from our federal and state coffers every year, we — all Americans — should consider prohibition repeal as critical to the state of our nation as debt reduction and healthcare reform.
Doubt me? If I can change my mind, so can you. In 2009, I helped manage a Republican primary campaign in my congressional district to oust Rep. Ron Paul (R-TX), my congressman. One newsletter that I signed as campaign director called weed a “troubling substance” and any measure to normalize it a “blatant disregard” for our district’s values.
My position was pretty standard. Bush speechwriter David Frum, notable for styling himself right-of-center on issues like gun violence, recently echoed the same rhetoric in an op-ed for CNN, warning of the rise of “Big Marijuana” and calling any medicinal use a “laughable fiction.”
Here's the thing: Sabin was right, Frum is wrong, and I was once as wrong as my pro-temperance great-grandmother. We need Big Marijuana. Republicans owe it to their party as much as our Constitution and nation to help decriminalize, legalize, tax, and regulate it as soon as possible.
The benefits far outweigh fears about gateway addiction and moral decline as dated as those of the Temperance Movement.
Here are the bolded headings that follow thiscommentary's introduction and provide a summary of the substantive points that follow:
1. Pot would create jobs and help prevent Detroit-style bankruptcies
2. We could unplug overcrowded prisons and save tax dollars
3. Legalization could help starve violent cartels at home and abroad
4. We could ease suffering for those who live with chronic illnesses
Sunday, September 15, 2013
Will Big Pharma, and "the Impact of Marijuana Pharmaceuticals," determine the future of marijuana reform?
The FDA will soon approve Sativex, the first marijuana-based pharmaceutical. Sativex is a tipping point in the marijuana law and the politics of strict prohibition. The reclassification of marijuana under the Controlled Substances Act is in the financial interests of the American pharmaceutical industry. The availability of marijuana-based, or synthetic cannabinoid-based, pharmaceuticals will change the politics of marijuana prohibition.
Thursday, September 12, 2013
There is nothing like pot to promote bipartisanship. An unusual coalition of liberal Oregon Democrat Rep. Earl Blumenauer, conservative California Republican Rep. Dana Rohrabacher, and Grover Norquist, the president of Americans for Tax Reform, came together outside the Capitol on a sweltering Thursday afternoon to talk about marijuana.
Once upon a time, as Blumenauer tells it, “a drug dealer, creatively, was trying to deduct the cost of a yacht” on his tax returns. The result of the ensuing outrage was 280E, a provision in the federal tax code that prohibits people who sell controlled substances, like pot, to take tax deductions or credits for that business.
When the provision was written in 1982, it applied mostly to people dealing drugs illegally. But now, with Washington state and Colorado legalizing recreational marijuana, and several other states legalizing the use of the drug for medical purposes, it’s having detrimental effects on legitimate operations. “This is not about a drug dealer and a yacht,” Blumenauer said. “This is about legal businesses.”
Blumenauer and Rohrbacher are pushing for Congress to get rid of 280E. “It’s goofy,” Blumenauer said, calling the provision “perhaps the most insane” of some of the tax laws on the books “because it doesn’t allow legal businesses to operate like other legal businesses.” Blumenauer said he thought this issue could help spur Congress along toward comprehensive tax reform.
Recent related post:
UPDATE: I just saw, thanks to a blog post via MPP, that Americans for Tax Reform has produced a little"white-paper" on this big tax issue. This four-page paper is titled "Legal Cannabis Dispensary Taxation: A Textbook Case of Punishing Law-Abiding Businesses Through the Tax Code." Here is the abstract from the paper:
Section 280E of the Internal Revenue Code (IRC) creates a gross receipts tax situation for legal cannabis dispensary small businesses. This is due to an accident of history and a perversion of Congressional intent. ATR supports fixing this mistake. H.R. 2240, the “Small Business Tax Equity Act of 2013” does so. ATR urges all Congressmen to support this common-sense legislation.
Wednesday, September 11, 2013
From ABC News here, "Feds in Talks With Banks Over Dealing With Marijuana Business"
From AFP here, "US will continue to jail pot dealers 'in all states'"
From the Detroit Free Press here, "U.S. needs smarter approach to marijuana policy, Sen. Patrick Leahy says"
From the Kansas City Star here, "Congress asked to provide fix for cash-only pot stores"
From the Los Angeles Times here, "Senators examine federal marijuana laws as states' rules evolve"
From the New York Times here, Answers Sought for When Marijuana Laws Collide"
From the Seattle Times here, " King County sheriff promises crackdown on public, underage pot smoking"
Tuesday, September 10, 2013
A few notable thoughts/moments during Senate Judiciary Committee Hearing on “Conflicts between State and Federal Marijuana Laws.”
Though starting a few minutes late, this afternoon, on September 10, 2013, as detailed at this official webpage, there is a hearing before the United States Senate Committee on the Judiciary on “Conflicts between State and Federal Marijuana Laws.” All the written testimony is now posted on line, including the opening statement by Senator Patrick Leahy (D-Vermont), Chairman of the Senate Judiciary Committee. I hope to find time to read and comment on these written statements in the near future.
What has now prompted me to start "live-blogging" here for a little while is the openning statment by Senate Judiciary Committee member Senator Chuck Grassley (R-Iowa). [It appears that StoptheDrugWar is doing some live-blogging of the hearing, too, at this link.]
Perhaps not too surprisingly, Senator Grassley's opening statement suggests he is none too pleased by the prospect of marijuana reforms, and he rattled off some statistics about what he claims were the failings of states with medical marijuana regimes. But somewhat surprising, at least by my lights, was Senator Grassley's decision at the outset of his statement to make much of international laws against marijuana. I was a bit surprised because I had recalled that Senator Grassley, as confirmed here on his website, was critical of Elana Kagan's suggestion should "would look to international law for 'good ideas' when interpreting the U.S. Constitution."
Also notable, getting now to the discussion between the few Judiciary Committee members present and Deputy AG James Cole, is that the first set of questions concern whether and how persons involved in state-legalized marijuana business might have access to banking services and other important commercial services subject to heavy federal regulation.
In Senator Grassley's questions for Deputy AG James Cole, the Senator raises the interesting idea of DOJ developing some metrics for measuring key federal priorities in the operation/impact of state marijuana regulatory schemes. Every the nerdy academic, I love the idea of metrics here, but I am not holding my breathe that DOJ will be developing these kind of mertics for public discussion anytime soon.
The testimony by King County, Washington Sheriff John Urquhart, who is in full dress uniform (as pictured here), includes a potent assertion that his state is not "the Wild Wild West" and includes the plea to let state's try this regulatory approach free of undue federal imposition of complications.
Monday, September 9, 2013
What questions should be central to Senate Judiciary Committee Hearing on "Conflicts between State and Federal Marijuana Laws"?
- The Honorable James Cole, Deputy Attorney General, U.S. Department of Justice
- The Honorable John Urquhart, Sheriff, King County [Washington] Sheriff’s Office
- Jack Finlaw, Chief Legal Counsel Office of [Colorado] Governor John W. Hickenlooper
- Kevin A. Sabet, Ph.D., Co-founder and Director, Project SAM Director, Drug Policy Institute, University of Florida
I am expecting and hoping that there will be written testimony from some or all of these witnesses posted via the Senate website within the next 24 hours, and I am planning to watch the webcast of the hearing (and perhaps even live-blog some of it here at Marijuana Law, Policy and Reform).
Here at The Weed Blog one can see a whole bunch of very hard questions that might be asked of DAG James Cole concerning federal policies and practices, which were set forth in a letter sent by the pro-reform group California NORML to Senator Dianne Feinstein. I doubt many of these questions will be asked verbatim, but they provide an effective pro-reform perspective on various ways in which state and federal marijuana laws, policies and practices operate at cross-purposes.
As the title of this post suggests, I am eager for readers of this blog to indicate what kinds of questions they might be most eager to see addressed in tomorrow's scheduled Senate hearing.
Cross-posted at Sentencing Law & Policy
Wednesday, September 4, 2013
The feds and the marijuana industry haven’t had an easy relationship....
Given the documented medical use of marijuana and state laws, you might think the feds would respect state law and states’ rights. You might also assume that the sizable federal and state taxes to be collected from the industry would be a prize. Oddly enough, though, the tax law discriminates so badly against the industry that it has had to virtually go underground.
The feds view has been that federal law controls. Medical need or not, state legality or not, marijuana is a controlled substance and illegal under federal law. Add to that the fact that many banks are reluctant to allow even legal marijuana businesses to open accounts in their institutions.
But now — one might say finally — the U.S. Department of Justice (DOJ) issued this response suggesting for the first time that it will lay off the raids and prosecutions. But there is a big condition. The feds will lay off only if the states create “a tightly regulated market” with rules that address federal “enforcement priorities” such as preventing interstate smuggling, diversion to minors, and “adverse public health consequences.” hose may be key phrases, but they seem imbued with considerable discretion ... [indicating] DOJ can still prosecute growers and sellers if Colorado and Washington fail to adequately address federal concerns....On top of this, it is worth asking how the IRS will react to this. The tax problems of the industry are notorious and one of the major impediments facing the industry. Unfortunately, there has been no IRS announcement on the heels of the DOJ and we should not expect much. The IRS is unlikely to lay off the tax attack it has mounted against marijuana income.
The reason is that even legal dispensaries are drug traffickers to the feds. And the main culprit is Congress, not the IRS. Section 280E of the tax code denies even legal dispensaries tax deductions. In the past the IRS has said it has no choice but to enforce the tax code passed by Congress.
“The federal tax situation is the biggest threat to businesses and could push the entire industry underground,” the leading trade publication for the marijuana industry reported. One answer has been for dispensaries to deduct expenses from other businesses distinct from dispensing marijuana. If a dispensary sells marijuana and is in the separate business of care-giving, the care-giving expenses are deductible. If only 10% of the premises are used to dispense marijuana, most of the rent is deductible.
Of course, good record-keeping is essential. And even if one is aggressive in allocating expenses between business, there is only so far one can go. Another idea is that marijuana sellers might operate as nonprofit social welfare organizations. That way Section 280E shouldn’t apply.
The industry needs to operate more like other businesses. Sometimes such matters involve structural questions. To avoid trouble with the IRS, some claim that dispensaries should be organized as cooperatives or collectives. A cooperative is owned and governed by its members. A collective is much less structured.
The tax issues here are clearly no joke.... Perhaps this facts suggests that the industry has really arrived. In other respects, though, including tax, banking and credit card processing for patients, the industry is still barely off the ground. And that is doubly disturbing, since the tax law seems an entirely inappropriate way to hinder (if not outright doom) these businesses.
Congressmen Jared Polis (D-CO) and Earl Blumenauer (D-OR) introduced the Marijuana Tax Equity Act to end the federal prohibition on marijuana and allow it to be taxed. This legislation would remove marijuana from the Controlled Substances Act. That way growers, sellers and users would not need to fear violating federal law. In addition, the bill would impose an excise tax on cannabis sales and an annual occupational tax on workers in the growing field of legal marijuana.
Tuesday, September 3, 2013
As noted in a posts here and here, there have been varied general reactions the recent announcement by Attorney General Eric Holder concerning federal marijuana policy (basics here; official statement here). What I think will prove to be most important, and what is already quite interesting, is how local- and state-level (official and unofficial) actors read and respond to this new policy. With this in mind, I found especially notable these recent stories from local papers in couple of notable states:
From Arizona here, "Prosecutors vow to push fight against marijuana"
From California here, "Federal announcement may impact local medical marijuana dispensaries"
More from California here, "Melinda Haag: New marijuana guidelines won’t affect local cases"
From Washington here, "Federal memo no pot panacea: The federal government’s shift in marijuana policy might lead to profound reforms around the country, but here in Washington state the news was more nuanced, allowing some breathing room for a legal-pot industry to develop, but leaving some obstacles unchanged."
Sunday, September 1, 2013
In these comments to a post about the recent announcement by Attorney General Eric Holder concerning federal marijuana policy, former federal prosecutor Bill Otis asserted that "what the AG is actually saying is that nothing is changing" and that the announcement was really no big deal. But, as evidenced by some very negative reactions by some drug war supporters, not everyone shares Bill's perspective.
This Huffington Post piece, for example, reports that police groups "that include sheriffs, narcotics officers and big-city police chiefs slammed Attorney General Eric Holder in a joint letter Friday [available here], expressing 'extreme disappointment' at his announcement that the Department of Justice would allow Colorado and Washington to implement state laws that legalized recreational marijuana for adults." Here is more via the Huff Post report:
"It is unacceptable that the Department of Justice did not consult our organizations -- whose members will be directly impacted -- for meaningful input ahead of this important decision," the letter reads. "Our organizations were given notice just thirty minutes before the official announcement was made public and were not given the adequate forum ahead of time to express our concerns with the Department’s conclusion on this matter. Simply 'checking the box' by alerting law enforcement officials right before a decision is announced is not enough and certainly does not show an understanding of the value the Federal, state, local and tribal law enforcement partnerships bring to the Department of Justice and the public safety discussion."
The missive was signed by the Major County Sheriffs’ Association, the National Sheriffs’ Association, the Association of State Criminal Investigative Agencies, the International Association of Chiefs of Police, the National Narcotic Officers Associations’ Coalition, the Major Cities Chiefs Police Association and the Police Executive Research Forum. Law enforcement, the police groups said, "becomes infinitely harder for our front-line men and women given the Department’s position."
In addition, this round-up from StoptheDrugWar.org reports on some other notable negative reactions from "opponents of marijuana law reform":
"Decades from now, the Obama administration will be remembered for undoing years of progress in reducing youth drug use in America," Dr. Paul Chabot of the Coalition for a Drug Free California said in a statement. "This president will be remembered for many failures, but none as large as this one, which will lead to massive youth drug use, destruction of community values, increased addiction and crime rates."...
"We can look forward to more drugged driving accidents, more school drop-outs, and poorer health outcomes as a new Big Marijuana industry targeting kids and minorities emerges to fuel the flames," warned former US Rep. Patrick Kennedy in a statement issued by Project SAM (Smart About Marijuana), a neo-prohibitionist organization that couches its policy aims amid public health concerns.
"This is disappointing, but it is only the first chapter in the long story about marijuana legalization in the US. In many ways, this will quicken the realization among people that more marijuana is never good for any community," said Project SAM cofounder and director Kevin Sabet....
The taxpayer-funded Community Anti-Drug Coalitions of America (CADCA) also weighed in with disappointment, doom, and gloom. "The Department of Justice announced that it will not sue to block the implementation of laws in Colorado and Washington that legalize marijuana, despite the fact that these laws are in conflict with federal law," said CADCA head Gen. Arthur Dean in a statement. "CADCA and its more than 5,000 community coalitions across the country have been anticipating a response from the administration that would reaffirm the federal law and slow down this freight train. Instead, this decision sends a message to our citizens, youth, communities, states, and the international community at large that the enforcement of federal law related to marijuana is not a priority."
"The fact remains that smoked marijuana is not medicine, it has damaging effects on the developing adolescent brain, and can be addictive, as evidenced by the fact that 1 in 6 youth who use it will become addicted," Dean claimed, adding that the country is in "a growing crisis" as marijuana law reforms take hold. "The nation looks to our Justice Department to uphold and enforce federal laws. CADCA is disappointed in the Justice Department's decision to abdicate its legal right in this instance. We remain gravely concerned that we as a nation are turning a blind eye to the serious public health and public safety threats associated with widespread marijuana use."
Cross-posted at Sentencing Law and Policy.
Thursday, August 29, 2013
In a memo sent Thursday to U.S. attorneys in all 50 states [and available at this link], Deputy Attorney General James M. Cole detailed the administration’s new stance, even as he reiterated that marijuana remains illegal under federal law.
The memo directs federal prosecutors to focus their resources on eight specific areas of enforcement, rather than targeting individual marijuana users, which even President Obama has acknowledged is not the best use of federal manpower. Those areas include preventing distribution of marijuana to minors, preventing the sale of pot to cartels and gangs, preventing sales to other states where the drug remains illegal under state law, and stopping the growing of marijuana on public lands.
A Justice Department official said that Attorney General Eric H. Holder Jr. had called the governors of Colorado and Washington around noon Thursday to inform them of the administration’s stance.
The official said Holder also told them that federal prosecutors would be watching closely as the two states put in place a regulatory framework for marijuana in their states, and that prosecutors would be taking a “trust but verify” approach. The official said the Justice Department reserves the right to revisit the issue....
Until Thursday, the Justice Department and the White House Office of National Drug Control Policy had remained silent about those initiatives, despite repeated requests for guidance from state officials....
The issue has been percolating since Obama took office, and he has repeatedly faced questions about the tension between differing federal and state laws.
This (relatively short) official DOJ Press Release provides this account of the decision:
Today, the U.S. Department of Justice announced an update to its federal marijuana enforcement policy in light of recent state ballot initiatives that legalize, under state law, the possession of small amounts of marijuana and provide for the regulation of marijuana production, processing, and sale.
In a new memorandum outlining the policy, the Department makes clear that marijuana remains an illegal drug under the Controlled Substances Act and that federal prosecutors will continue to aggressively enforce this statute. To this end, the Department identifies eight (8) enforcement areas that federal prosecutors should prioritize. These are the same enforcement priorities that have traditionally driven the Department’s efforts in this area.
Outside of these enforcement priorities, however, the federal government has traditionally relied on state and local authorizes to address marijuana activity through enforcement of their own narcotics laws. This guidance continues that policy.
For states such as Colorado and Washington that have enacted laws to authorize the production, distribution and possession of marijuana, the Department expects these states to establish strict regulatory schemes that protect the eight federal interests identified in the Department’s guidance. These schemes must be tough in practice, not just on paper, and include strong, state-based enforcement efforts, backed by adequate funding. Based on assurances that those states will impose an appropriately strict regulatory system, the Department has informed the governors of both states that it is deferring its right to challenge their legalization laws at this time. But if any of the stated harms do materialize — either despite a strict regulatory scheme or because of the lack of one — federal prosecutors will act aggressively to bring individual prosecutions focused on federal enforcement priorities and the Department may challenge the regulatory scheme themselves in these states.
Cross-posted at Sentencing Law and Policy
Wednesday, August 14, 2013
Federal marijuana policies and practices the big dog not barking in AG Holder's big criminal justice speech
Given the profound and profoundly important debate over reform of modern marijuana laws engendered by recent changes in many states' laws, one might have well expected that AG Holder would address the seemingly "tired status quo" of federal marijuana prohibition and suggest possible "bold steps to reform" the uneasy relationship between federal and local pot laws. But, quite notably, Holder said nothing directly addressing this pressing issues.
That said, AG Holder did take something of a swipe the general status quo on drug policies when he said "as the so-called 'war on drugs' enters its fifth decade, we need to ask whether it, and the approaches that comprise it, have been truly effective." That comment alone should at least encourage marijuana reform advocates.
But, critically and somewhat problematically, the Obama administration has yet formally announce any stance on how it will approach marijuana markets and use in Washington state and Colorado after voters approved initiatives to permit recreational adult use back in November. Nearly six months ago, Holder indicated that some specific federal response to these new state laws was "coming soon." But, as these states and others continue to explore methods and mechanisms for allowing its citizens to have legal access to marijuana, its seems that AG Holder is still not yet ready to discuss these issues as part of his active reform agenda.