Thursday, October 6, 2011

Obama Administration Declares War on Medical Marijuana in California

Medical marijuana advocates in California are surely depressed by the hostility of many local governments toward the existence of both cultivators and dispensaries. Unfortunately, when it comes to a true existential threat to an industry that voters declared legal back in 1996, one need look no further than the heaviest of heavy hands: the federal government. In just the past week, DC has taken steps that could quickly accomplish what years of municipal regulation and raids on growers couldn't.

On one front, the IRS is continuing its efforts to use the tax code to drive medical pot dispensaries out of business. Back in March, we noted that the IRS had disallowed the business deductions of the Marin Alliance for Medical Marijuana in Fairfax, on the grounds that tax deductions and credits cannot be claimed by businesses that "traffic in controlled substances." As such, Marin was told it owed millions in back taxes. Unfortunately, according to the San Francisco Chronicle, the tax police have moved on to one of the largest marijuana dispensaries in the world, sending a $2.5 million tax bill to Harborside Health Center in Oakland. Executive director Steve DeAngelo, for one, isn't fooled: "This is not an effort to tax us. We're happy to pay our taxes. This is an effort to shut us down."

Heavy-handed as this might seem, it's subtle compared to what the U.S. attorneys from California's four federal districts are up to: in letters sent to targeted dispensaries around the state, the feds have ordered all landlords and operators of dispensaries and cultivation facilities to close within 45 days, or face property seizure and/or criminal prosecution. While the text of the letter makes clear that the attorneys are looking for signs of illegal activity, it also makes clear that their approach to prosecution will involve targeting larger dispensaries first, without regard to anything resembling probable cause. Importantly, the threshold for civil forfeiture is much lower than that needed for a criminal indictment. So solid evidence of criminal activity won't be needed to shut the dispensaries down.

Given the Obama Administration's, well, less-than-accommodating stance towards medical marijuana, this is hardly surprising. But it's still a tough moment for Californians using pot to relieve pain and suffering. Not even the silver lining of depriving Sacramento of $100 million in sales tax revenue makes us feel better about it.

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