By Carole C. Schriefer, R.N., J.D., The Health Law Firm
On May 10, 2016, a marijuana dispensary urged a Colorado federal court to preserve its challenge to the U.S. Internal Revenue Service’s (IRS) rejection of its tax deductions. The dispensary, Alpenglow Botanicals LLC, says the agency’s stance that the business violates federal drug law poses a threat to the Centennial State’s legalized marijuana industry.
IRS Acted Out of Its Jurisdiction?
According to the dispensary, the IRS acted outside its jurisdiction by allegedly conducting a secret criminal investigation of the business, adding that the owners of the dispensary have never been convicted, or even accused, of violating the Controlled Substances Act.
In February 2016, Alpenglow alleged that the IRS was stepping outside of its jurisdiction by determining that the company was a drug trafficker, but the IRS said that it was simply enforcing a civil provision of the tax code. To read more click here, to read the initial complaint, click here.
Furthermore, Alpenglow said the IRS lacks the authority to determine whether the dispensary’s business activities violate a criminal statute outside of the Internal Revenue Code. As a result of the agency’s actions, the owners of the dispensary were stuck with a combined increase in tax liability of more than $53,000, according to the brief. To read the response to the motion in full, click here.
IRS Stance: Businesses May Be Legal Under State Law, Marijuana is a Controlled Substance Under Federal Law.
Alpenglow is one of many marijuana retailers that have challenged the IRS stance that although the businesses may be legal under state law, marijuana is a controlled substance under federal law and taxpayers cannot deduct expenses related to businesses that run afoul of federal drug laws.
“Although the IRS’s actions result in the collection of revenue, this will be short-lived, as this policy, if allowed to continue, will quickly stamp out all of Colorado’s legalized marijuana industry,” Alpenglow said, arguing that the agency’s practice unlawfully converts tax charges into penalties in violation of the Eighth Amendment.
In a similar case from 2015, the U.S. Tax Court said that the owner of two California medical marijuana dispensaries was prohibited from claiming deductions related to the businesses under federal drug trafficking laws and upheld a $1.2 million tax deficiency assessed by the IRS. Click here to read about this case.
For more information on medical marijuana legislation, click here to read our medical marijuana law blog.
Contact Experienced Health Law Attorneys for Medical Marijuana Concerns.
The Health Law Firm attorneys can assist health care providers and facilities, such as doctors, pharmacists and pharmacies, wanting to participate in the medical marijuana industry. We can properly draft and complete the applications for registration, permitting and/or licensing, while complying with Florida law. We can also represent doctors, pharmacies and pharmacists facing proceedings brought by state regulators or agencies.
To contact The Health Law Firm please call (407) 331-6620 and visit our website at www.TheHealthLawFirm.com.
Sheehan, Hannah. “Colo. Pot Dispensary Fights IRS Over Uprooted Deductions.” Law360. (May 11, 2016). Web.
Powell, Christine. “IRS Deduction Denial Beyond Jurisdiction, Pot Dispensary Says.” Law360. (May13, 2016). Web.
About the Author: C. Schriefer is a nurse-attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620. It has a branch office in Fort Collins, Colorado.
KeyWords: Colorado medical marijuana industry, medical marijuana, marijuana dispensaries, Internal Revenue Services (IRS), Alpenglow Botanicals LLC., violating federal drug laws, legalized marijuana industry, legal defense of medical marijuana retailers, health law defense attorney, health law, The Health Law Firm
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