Request A Case Evaluation Or Tax Resolution Development Plan

Federal Government Enforcing Prohibition Of Cannabis On Public Lands

Off-Site Manager of Marijuana Grow in Shasta-Trinity National Forest Sentenced to 10 Years in Prison

The U.S. Attorney’s Office for the Eastern District Of California issued a press release on February 24, 2020 that Dimas Ortiz, 26, of Michoacán, Mexico, was sentenced by U.S. District Judge Kimberly J. Mueller to 10 years in prison and ordered to pay $10,000 in restitution to the U.S. Forest Service for growing marijuana on the National Forest and for depredation of Public Lands and Resources, U.S. Attorney McGregor W. Scott announced.

The Federal Case Against Dimas Ortiz

According to court documents, Ortiz oversaw the marijuana growing operations of several other men in the Shasta-Trinity National Forest to the west of Weaverville, near Limedyke Mountain, at an elevation of approximately 2,500 feet. On August 7, 2017, law enforcement officers executed a search of the grow and eradicated more than 2,500 marijuana plants. A camp site was found where the on-site workers had camped. Ortiz oversaw the operation from a distance. He helped finance the operation, provided the supplies for the grow site, and directed the activities of his co-defendants. Ortiz expected the operation to yield 800 pounds of processed marijuana, worth $500,000, of which he was to receive 25%. In 2016, Ortiz was the driver for the same grow site and he and others harvested approximately 800 pounds of processed marijuana.

The environmental damage to the forest was analyzed and documented by Integral Ecology Research Center, a non-profit organization dedicated to the research and conservation of wildlife and their ecosystems that has examined over 100 public land marijuana grow sites.

According to the report of the investigation filed with the court, at this grow site, a half-full 33.8 oz. bottle of carbofuran was found hidden among the fertilizer bags and a bag containing an estimated 20 pounds of suspected powder carbofuran. Carbofuran is a toxic pesticide that is banned in the United States. A food bottle found at the site had been reused and contained a mixture of refried beans and carbofuran (suspected bait for animals). The environmental assessment concluded that the carbofuran and other pesticides and fertilizer at the grow site likely posed a significant direct risk to a number of endangered species, including the bald eagle, the northern spotted owl, and the coho salmon. Four cisterns were discovered with water diverted from mountain streams for use in the marijuana grow’s irrigation system with an estimated 4,500 feet of plastic irrigation lines for water and over 2,200 pounds of soluble fertilizer.

The report estimates that the operation used over 15,000 gallons of water per day. Open campsite latrines were also found in proximity to waterways that would cause watershed contamination from the latrines’ fecal matter after the next substantial rain. About 1,000 pounds of trash and 500 pounds of plastic irrigation lines were hauled out of the site. Tests on samples of the marijuana plants determined that carbofuran was present in the plant material.

Cannabis Is Illegal Under Federal Law

Anyone conducting business in cannabis surely knows that under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. The Trump Administration is serious about cracking down on this as we reported in our blog.

But until Federal law changes, the cannabis industry will still have to bear the followings risks and challenges:

Higher Taxes Still Remain

It still remains to be seen when favorable changes will be made to the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.

Reporting Of Cash Payments Still Remain

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file

IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Los Angeles and other California locations protect you and maximize your net profits. And if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.

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. There are several options for you to meet or connect with Board Certified Tax Attorney Jeffrey B. Kahn. 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. 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 session fee paid for the Tax Resolution Development Plan Session.

Types Of Initial Sessions:

Most Popular GoToMeeting Virtual Tax Development Resolution Plan Session
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Requires a computer, laptop, tablet or mobile device compatible with GoToMeeting. Please allow up to a 10-minute window following the appointment time for us to start the meeting. How secure is GoToMeeting? Your sessions are completely private and secure. All of GoToMeetings solutions feature end-to-end Secure Sockets Layer (SSL) and 128-bit Advanced Encryption Standard (AES) encryption. No unencrypted information is ever stored on our system.


Face Time or Standard Telephone Tax Development Resolution Plan Session
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Face Time requires an Apple device. Please allow up to a 10-minute window following the appointment time for us to get in contact with you. If you are located outside the U.S. please call us at the appointed time.


Reduced Fee Face-To-Face Tax Development Resolution Plan Session (Irvine Office Only)
Maximum Duration: 60 minutes - Session
Fee: $350.00 (Credited if hired*)
Session is held at our main office. 15615 Alton Parkway, Suite 450, Irvine, CA 92618.


Standard Fee Face-To-Face Tax Development Resolution Plan Session (Any Location Outside Our Irvine Office)
Maximum Duration: 60 minutes - Session
Fee: $600.00 (Credited if hired*)
Session is held at any of our offices outside our Irvine office or any other location you designate such as your financial adviser’s office or your accountant’s office, your place of business or your residence.


Jeff’s office can take your credit card information to charge the session fee which secures your session.

* The session fee is non-refundable and any allotted duration of time unused is not refunded; however, the full session fee will be applied as a credit toward future service if you choose to engage our firm.