On January 4, 2018, former U.S. Attorney General Jeff Sessions announced the revocation of what is known in the cannabis industry as the “Cole Memo”. Attorney General Nominee William Barr Appears Committed To Reverse This Stance And Leave State-Legal Marijuana Programs Alone.
In Senate testimony on January 15, 2019, nominee for Attorney General William Barr committed to not use the limited resources of the Department of Justice to prosecute state-regulated and compliant marijuana businesses. His statements came response to questions from Senators Cory Booker (D-NJ) and Kamala Harris (D-CA) — each of whom represent states where marijuana is legally regulated for either medical or recreational purposes.
Thirty-three states, Washington, D.C. and the U.S. territories of Guam, Puerto Rico and Northern Mariana Islands have enacted legislation specific to the medical use of cannabis. Almost one-third of these jurisdictions have also approved that recreational use of marijuana. Just in California alone with the change in law allowing both medical and recreational marijuana, the marijuana industry in California is expected to be a $3.7 billion market in 2018 and could rise to $5.1 billion in 2019 according to the cannabis industry research firm BDS Analytics.
However, under Federal law marijuana is designated as a Schedule I controlled substance and therefore is illegal under Federal law.
The Cole Memo which came out of the Department Of Justice (“DOJ”) under the Obama administration in 2013, directed U.S. Attorneys to use discretion to prioritize certain types of violations in prosecuting cannabis operators, but, strictly speaking, it did not make operations in cannabis legal. The DOJ told its prosecutors that prosecuting medical marijuana cases in states where is has been legalized would no longer be a priority.
The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:
- Does the business allow minors to gain access to marijuana?
- Is revenue from the business funding criminal activities or gangs?
- Is the marijuana being diverted to other states?
- Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
- Are violence or firearms being used in the cultivation and distribution of marijuana?
- Does the business contribute to drugged driving or other adverse public health issues?
- Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
- Is marijuana being used on federal property?
Rohrabacher-Blumenauer Amendment (f/k/a Rohrabacher-Farr Amendment)
Building on the DOJ’s issuance of the Cole Memo, in 2014 the House passed an amendment to the yearly federal appropriations bill that effectively shields medical marijuana businesses from federal prosecution. Proposed by Representatives Rohrabacher and Blumenauer, the amendment forbids federal agencies to spend money on investigating and prosecuting medical marijuana-related activities in states where such activities are legal.
The amendment states that:
None of the funds made available under this Act to the Department of Justice may be used, with respect to any of the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, or with respect to the District of Columbia, Guam, or Puerto Rico, to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.
Although Sessions is gone, his legacy of overriding the Cole Memo still continues and U.S. Attorneys in each Federal district still retain broad prosecutorial discretion as to whether to prosecute cannabis businesses under federal law even though the state that these businesses operate in have legalized some form of marijuana. Now the Rohrabacher-Blumenauer Amendment still prevents the DOJ from prosecuting state approved medical marijuana businesses but not having safe harbor guidelines in place at a national level adds uncertainty as to how DOJ may come down on your business. So it is essential that you have legal counsel to back you up.
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, Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.