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The Growing Gray Market – What’s Up With Cannabis Churches?

Despite California’s legalization of cannabis, many localities in California have yet to enact local enabling legislation to allow cannabis operators to set up shop within their city limits. For those cities that have passed this enabling legislation, many would-be operators tend to find it too difficult to get the necessary approvals or are put on wait-lists due to the lack of available licenses. It is this type of environment that a growing gray market is happening in California.

One way that operators attempt to circumvent these limitations, is to set up shop as a “cannabis church”. You need to look no further than Weedmaps to find dozens of “churches” advertising their first time patient specials, happy hours and freedom from state and local taxes but showing no times for attending services.

Religious Freedom Restoration Act of 1993 

The Religious Freedom Restoration Act of 1993 (RFRA) prohibits any agency, department, or official of the United States or any State (the government) from substantially burdening a person’s exercise of religion even if the burden results from a rule of general applicability, except that the government may burden a person’s exercise of religion only if it demonstrates that application of the burden to the person: (1) furthers a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.

The RFRA was amended by the Religious Land Use And Institutionalized Persons Act of 2000 (RLUIPA) to redefine exercise of religion as any exercise of religion, “whether or not compelled by, or central to, a system of religious belief”, which is to be “construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the terms of this chapter and the Constitution”.

RFRA Ruled Constitutional

The Supreme Court upheld the constitutionality of the RFRA as applied to federal statutes in the case of Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418 (2006). The facts in this case are similar to what exists with cannabis churches.  On May 21, 1999, U. S. Customs agents seized over 30 U.S. gallons of hoasca (ayahuasca) tea which was shipped to the Santa Fe, New Mexico branch of the Brazil-based church. Ayahuasca contains dimethyltryptamine, a Schedule 1 substance. While no charges were filed, the United States chapter, led by Seagram heir Jeffrey Bronfman, filed suit claiming that the seizure was an illegal violation of the church members’ rights. The case went up to the U.S. Supreme Court which upheld the RFTA and ruled in favor of the church stating that government had failed to show a compelling interest in prosecuting religious adherents for drinking a sacramental tea containing a Schedule 1 controlled substance.

Cannabis Churches Still At Risk

The Federal Controlled Substances Act (“CSA”) 21 U.S.C. § 812 classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. So while operators may look to the RFTA as a way of gaining Federal protection and bypassing State and Local laws, any of these levels of government can still make a case to seize the marijuana and prevent further distribution where it (1) furthers a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.

What Should You Do?

Given the illegal status of cannabis under Federal law you need to protect yourself and your marijuana business especially if organized as a cannabis church from all challenges created by the U.S. government.  Although cannabis is legal in California, that is not enough to protect you. Be proactive and engage an experienced attorney-CPA in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Inland Empire (Ontario) and other California locations protect you and maximize your net profits.

Request A Case Evaluation Or Tax Resolution Development Plan

Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. You would meet with Board Certified Tax Attorney Jeffrey B. Kahn at the office location most convenient to you. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you and take your credit card information to charge the $600.00 session fee which secures your appointment. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the $600.00 charge for the Tax Resolution Development Plan Session.