Phoenix Seeks Balance in Governing Medical Marijuana

Arizona Republic:  Phoenix Planning and Development Services Director Debra “Stark said the city tried to strike a balance with its zoning laws that would be strict enough to protect the community and neighborhoods, but not too strict that they wouldn’t be allowed in the city at all.   Phoenix divided medical marijuana land uses into three categories

By |2012-08-18T10:01:22-07:00December 31st, 2010|Stories & Articles, Zoning|Comments Off on Phoenix Seeks Balance in Governing Medical Marijuana

5 San Luis Obispo County California Medical Marijuana Delivery Services Raided & 13 People Arrested

Americans for Safe Access:  “A Narcotics Task Force (NTF) made up of local and state law enforcement agencies aggressively raided 5 collectively-run medical marijuana delivery services on Monday, Tuesday and Wednesday this week, arresting at least 13 people on felony charges and holding them on bails of up to $100,000. Several of those arrested were charged with child endangerment, after Child Protective Services (CPS) removed at least 6 children from the homes of 3 different families.”

By |2015-04-06T18:49:24-07:00December 30th, 2010|California News, Marijuana Crimes|Comments Off on 5 San Luis Obispo County California Medical Marijuana Delivery Services Raided & 13 People Arrested

Long Beach Pot Law Gets Legal Setback

Press Telegram:  “The future of Long Beach’s medical marijuana regulations – and potentially of medical marijuana throughout the state – is in question after an appeals court ruling Wednesday.  The 2nd District Court of Appeals ruled that a Los Angeles County Superior Court judge must reexamine his decision Nov. 2 upholding Long Beach’s new medical marijuana ordinance.  At issue is whether Long Beach’s issuance of permits for medical marijuana collectives is a violation of federal law, which considers marijuana an illegal drug.”

Whatever the outcome  of the case when it is reconsidered by the trial court, the losing party will surely appeal.  It appears that in the not too distant future a California appellate court will determine if federal law preempts California law.  If the appellate court answers the question in the affirmative, that could be the beginning of the end of California’s medical marijuana law and other states that have legalized medical marijuana can expect to have the same battle in their courts.

By |2017-10-07T09:54:50-07:00December 30th, 2010|California News, Legal Issues, Stories & Articles|Comments Off on Long Beach Pot Law Gets Legal Setback

October 19, 2009, Department of Justice Guidelines to Federal Prosecutors on Medical Marijuana in States that Have Legalized Its Use

Department of Justice Guidelines for Federal Prosecutors in States that Legalize Medical Marijuana

On October 19 , 2009, “Attorney General Eric Holder announced formal guidelines for federal prosecutors in states that have enacted laws authorizing the use of marijuana for medical purposes. Those guidelines are contained in a memo from Deputy Attorney General David W. Ogden.”  The following is the text of the Department of Justice  medical marijuana letter.

October 19,2009

MEMORANDUM FOR SELECTED UNITED STATES ATTORNEYS

FROM: David W. Ogden, Deputy Attorney General

SUBJECT: Investigations and Prosecutions in States Authorizing the Medical Use of Marijuana

This memorandum provides clarification and guidance to federal prosecutors in States that have enacted laws authorizing the medical use of marijuana. These laws vary in their substantive provisions and in the extent of state regulatory oversight, both among the enacting States and among local jurisdictions within those States. Rather than developing different guidelines for every possible variant of state and local law, this memorandum provides uniform guidance to focus federal investigations and prosecutions in these States on core federal enforcement priorities. (more…)

By |2015-04-06T18:49:24-07:00December 30th, 2010|Legal Issues, Marijuana Crimes|Comments Off on October 19, 2009, Department of Justice Guidelines to Federal Prosecutors on Medical Marijuana in States that Have Legalized Its Use

Business Proposals for Arizona’s Budding Medical Marijuana Industry

Phoenix New Times:  “Next spring means all kinds of green in Arizona. Sometime in April, medical marijuana will be available to qualified patients across the state, and as we’ve already pointed out, that means big business in the form of dispensaries, doctor recommendations, and grow houses.  But most people can’t afford to launch any of the above businesses, and many won’t qualify under the Arizona Department of Health’s super-strict proposed guidelines. Luckily, there are plenty of fringe businesses one can start. Here are eight business proposals that could get a piece of the Pot, Inc. pie:”

By |2011-05-09T07:26:33-07:00December 30th, 2010|Stories & Articles|Comments Off on Business Proposals for Arizona’s Budding Medical Marijuana Industry

12 San Luis Obispo County Residents Arrested in Investigation of Mobile Marijuana Dispensaries

San Luis Obispo Tribune:  “Twelve San Luis Obispo County residents were arrested this week after a two-month investigation into mobile marijuana dispensaries on the Central Coast.  The investigation began after law enforcement agencies learned that several people were selling marijuana through mobile dispensaries in San Luis Obispo, Santa Barbara and Monterey counties, according to a news release from the San Luis Obispo County Narcotic Task Force.”

By |2017-02-11T17:33:43-07:00December 30th, 2010|California News, Marijuana Crimes|Comments Off on 12 San Luis Obispo County Residents Arrested in Investigation of Mobile Marijuana Dispensaries

Can I Get a License to Grow Medical Marijuana in Arizona, but Sell Only to Dispensaries?

Question:  Can I create a business in Arizona that only grows marijuana and sells it to licensed medical marijuana dispensaries?

Answer as of 1/31/11:  Yes.  The January 31,2011, second draft of the rules eliminated the requirement that all dispensaries grow any portion of the marijuana.  A condition to growing, however, is that the grower must have a license to operate a dispensary.  It is not possible to get a license to grow without operating a dispensary.

Answer Before 1/31/11:  Not unless the Arizona Department of Health Services changes its proposed rules.  Proposition 203 and the December 17, 2010, first draft of the proposed rules allow only licensed dispensaries to grow and sell medical marijuana.  The  proposed rules contains this provision:

“R9-17-307. Administration.  C. A dispensary:

1.  Shall cultivate at least 70% of the medical marijuana the dispensary provides to qualifying patients or designated caregivers;

2.  Shall only provide medical marijuana cultivated or acquired by the dispensary to another dispensary in Arizona, a qualifying patient, or a designated caregiver authorized by A.R.S. Title 36, Chapter 28.1 and this Chapter to acquire medical marijuana;

3.  May only acquire medical marijuana from another dispensary in Arizona, a qualifying patient, or a designated caregiver;

4.  May acquire up to 30% of the medical marijuana the dispensary provides to qualifying patients and designated caregivers from another dispensary in Arizona, a qualifying patient, or a designated caregiver; and

5.  Shall not provide more than 30% of the medical marijuana cultivated by the dispensary to other dispensaries.”

By |2011-02-01T07:02:29-07:00December 28th, 2010|DHS Rules, Questions People Ask|Comments Off on Can I Get a License to Grow Medical Marijuana in Arizona, but Sell Only to Dispensaries?

Colorado’s Elevations Credit Union Refuses Business with Medical Marijuana Dispensaries

Boulder Weekly:  “Add one of Boulder County’s local financial institutions, Elevations Credit Union, to the ever-growing list of financial institutions that are refusing to do business with Colorado’s medical marijuana dispensaries.  Elevations started sending letters to its commercial account holders in January saying that its “Member Due Diligence Program” requires identifying the nature of each of its business accounts.  ‘With the growing number of medical marijuana dispensaries and related business,’ the letter says, ‘we must determine if your business provides any of the following services: Sale of marijuana, production of marijuana, storage of marijuana’.”

By |2012-08-25T08:07:26-07:00December 28th, 2010|Banking Issues, Colorado News|Comments Off on Colorado’s Elevations Credit Union Refuses Business with Medical Marijuana Dispensaries

Will Some Banks Refuse to Give My Dispensary a Bank Account?

Question:  I’ve formed my nonprofit entity and want to open a bank account in the name of the entity.  Will my bank refuse to open an account because the business is growing and selling medical marijuana?

Answer:  Maybe.  If your entity has the word “marijuana” in its name, you may be dead in the water with many banks.  Unfortunately, many banks and credit unions refuse to do business with a medical marijuana business.  You may have to search to find a bank that is willing to open an account for your medical marijuana business.

In a  May 20, 2010, letter six members of the  U.S. House of Representatives asked Treasury Secretary Geithner to help solve the problem of banks refusing to do business with state legal medical marijuana businesses.  The letter states:

“dispensary operators are finding it increasingly difficult to maintain accounts with financial institutions, due to what a spokesman for Chase bank called, ‘financial operational and compliance risk.’  Thus, it seems clear that legitimate state-legal businesses are being denied access to banking services, which does not serve the public interest. Among other concerns, the effects of this denial of service include: (1) an increased risk to public safety with potential theft or robbery that any cash-only or cash-reliant business faces; (2) a decreased likelihood that medical marijuana vendors will have the ability to accurately account for tax liability; and (3) an affront to fundamental fairness. since forcing businesses to operate with cash exposes the owners to greater legal risk under the Bank Secrecy Act.

we respectfully request that your office issue formal written guidance for financial institutions assuring that Department priorities do not include targeting or pursuing institutions whose account holders are involved in a business ostensibly operating in compliance with a state medical marijuana law.”

In a  July 30, 2010 letter to Congresswoman Zoe Loftgren, the Office of the Comptroller of the Currency, Office of Thrift Supervision, Office of Thrift Supervision, National Credit Union Administration responded to the May 20, 2010, letter to Secretary Geithner and politely said the equivalent of the federal government couldn’t care less.  Here’s the conclusion reached in the letter:

“The decision to open, close or refuse a particular account or relationship should be made by a depository institution without involvement by its supervisor. An institution must make its own assessment of whether or not to accept an account based on its business objectives, an evaluation of the risks associated with offering particular products or services to customers or members, as well as its capacity to effectively manage those risks.”

By |2015-04-06T18:49:24-07:00December 28th, 2010|Banking Issues, Questions People Ask|Comments Off on Will Some Banks Refuse to Give My Dispensary a Bank Account?

Medical Cannabis Dispensaries: Minimizing the Cost of IRC Section 280E

Luigi Zamarra, CPA is the Chief Financial Officer of Harborside Health Center, recognized as one of the largest medical cannabis dispensaries in the United States.  Mr. Zamarra has written an interesting article entitled “Medical Cannabis Dispensaries: Minimizing the Cost of IRC Section 280E” that is a must read for all prospective owners of Arizona medical marijuana dispensaries.  The article explains how a medical marijuana business that is legal under state law can allocate its expenses between deductible and nondeductible expenses so as to comply with the Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue Tax Court case and also deduct a substantial portion of its “nontrafficking” expenses.  Mr. Zamarra says:

“Making a 280E calculation is a three-step process. First, allocate all occupancy costs between Retail (this term is used herein to denote those operations, a portion of which would ordinarily be considered “trafficking” as this term is used in Section 280E) and Non-Retail operations. Second, make the same allocation for all payroll-related costs. Third, apply the ‘Transactional Factor’.”

Circular 230 Notice:  Pursuant to U.S. Treasury Department regulations, I am required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including  links, is not intended or written to be used, and  may not be used, for the purpose of  (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

By |2015-04-06T18:49:23-07:00December 27th, 2010|Tax Issues|Comments Off on Medical Cannabis Dispensaries: Minimizing the Cost of IRC Section 280E

Internal Revenue Code Section 280E

How to Calculate the Taxable Income of a Medical Marijuana Dispensary Business Under Section 280E of the Internal Revenue Code

In the U.S. Tax Court case of Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue, 128 T.C. No. 14 (2007), the issue before the court was whether the Petitioner (CHAMP) could deduct ordinary expenses of $213,000 incurred in its medical marijuana business, a business that was legal under California law.  The Tax Court held that Internal Revenue Code Section 280E prohibited the deductions.  Here are some relevant statements made by the Court in its opinion:

Accrual method taxpayers such as petitioner may generally deduct the ordinary and necessary expenses incurred in carrying on a trade or business. See sec. 162(a).

Items specified in section 162(a) are allowed as deductions, subject to exceptions listed in section 261. See sec. 161. Section 261 provides that“no deduction shall in any case be allowed in respect of the items specified in this part.”

The phrase “this part” refers to part IX of subchapter B of chapter 1, entitled “Items NotDeductible”. “Expenditures in Connection With the Illegal Sale of Drugs” is an item specified in part IX. Section 280E provides:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”

In the context of section 280E, marijuana is a schedule I controlled substance. See, e.g., Sundel v. Commissioner, T.C. Memo. 1998-78, affd. without published opinion 201 F.3d 428(1st Cir. 1999). Such is so even when the marijuana is medical marijuana recommended by a physician as appropriate to benefit the health of the user.

As a result of the CHAMP case and Section 280E of the Internal Revenue Code, it is very easy to calculate the taxable income of a business that’s only business is growing or selling medical marijuana.  Here’s how it works:

Gross Income – Cost of Goods Sold = Taxable Income

By |2012-08-05T10:31:54-07:00December 27th, 2010|Tax Issues|Comments Off on Internal Revenue Code Section 280E

Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue

In 2007 the U.S. Tax Court held that Internal Revenue Code Section 280E prevents expenses incurred in a business of growing or selling medical marijuana that is legal under California law from being deductible in determining the taxable income of the business for federal income tax purposes.

128 T.C. No. 14

UNITED STATES TAX COURT

CALIFORNIANS HELPING TO ALLEVIATE MEDICAL PROBLEMS, INC., Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE
, Respondent

Docket No. 20795-05
Filed May 15, 2007

P provided counseling and other caregiving services (collectively, caregiving services) to its members, who were individuals with debilitating diseases. P also provided its members with medical marijuana pursuant to the California Compassionate Use Act of 1996, codified at Cal. Health & Safety Code sec. 11362.5 (West Supp. 2007). P charged its members a membership fee that generally reimbursed P for its costs of the caregiving services and its costs of the medical marijuana. R determined that all of P’s expenses were nondeductible under sec. 280E, I.R.C., because, R determined, the expenses were incurred in connection with the trafficking of a controlled substance.

Held: Sec. 280E, I.R.C., precludes P from deducting its expenses attributable to its provision of medical marijuana.

Held, further, P’s provision of its caregiving services and its provision of medical marijuana were separate trades or businesses for purposes of sec. 280E, I.R.C.; thus, sec. 280E, I.R.C., does not preclude P from deducting the expenses attributable to the caregiving services.

Matthew Kumin, Henry G. Wykowski, and Willian G. Panzer, for petitioner.

Margaret A. Martin, for respondent.

LARO, Judge: Respondent determined a $355,056 deficiency in petitioner’s 2002 Federal income tax and a $71,011 accuracy related penalty under section 6662(a) . (Note 1)  Following concessions by respondent, including a concession that petitioner is not liable for the determined accuracy-related penalty, we decide whether section 280E precludes petitioner from deducting the ordinary and necessary expenses attributable to its provision of medical marijuana pursuant to the California Compassionate Use Act of 1996, codified at Cal. Health & Safety Code sec. 11362.5 (WestSupp. 2007).   (Note 2)  We hold that those deductions are precluded. We also decide  whether section 280E precludes petitioner from deducting the ordinary and necessary expenses attributable to its provision of counseling and other caregiving services (collectively, caregiving services). We hold that those deductions are not precluded.

FINDINGS OF FACT

Certain facts were stipulated and are so found. The stipulation of facts and the exhibits attached thereto are incorporated herein by this reference. When the petition was filed, petitioner was an inactive California corporation whose mailing address was in San Francisco, California. Petitioner was organized on December 24, 1996, pursuant to the California Nonprofit Public Benefit Corporation Law, Cal. Corp. Code secs. 5110-6910. (West 1990). (Note 3)  Its articles of incorporation stated that it “is organized and operated exclusively for charitable, educational and scientific purposes” and “The property of this corporation is irrevocably dedicated to charitable purposes”. Petitioner did not have Federal tax-exempt status, and it operated as an approximately break-even (i.e., the amount of its income approximated the amount of its expenses) community center for members with debilitating diseases. Approximately 47 percent of petitioner’s members suffered from Acquired Immune Deficiency Syndrome (AIDS); the remainder suffered from cancer, multiple sclerosis, and other serious illnesses. Before joining petitioner, petitioner’s executive director had 13 years of experience in health services as a coordinator of a statewide program that trained outreach workers in AIDS prevention work. (more…)

By |2010-12-27T19:00:28-07:00December 27th, 2010|Tax Issues|1 Comment

Bylaws – We Don’t Need No Stinking Bylaws or Do We?

Question:  What are Bylaws & Must My Dispensary Adopt Bylaws?

Answer:  Black’s law dictionary defines Bylaws as “a rule or administrative provision adopted by an organization for its internal governance and its external dealings.”  Bylaws have traditionally been a set of rules adopted by the Board of Directors of a corporation to govern the internal affairs of the corporation.   In fact, Arizona Revised Statutes Section 10-3206 requires all Arizona nonprofit corporations to have Bylaws.

Arizona enacted its limited liability company laws in 1992, but nothing in the Arizona LLC Act refers to Bylaws or requires Arizona LLCs to adopt Bylaws.  As a result, Arizona LLCs that have Bylaws are exceptions to the general rule that Arizona LLCs do not have Bylaws.  The Operating Agreement is the Arizona LLC’s governing document that replaces corporate Bylaws.  Because the most commonly formed entity in Arizona today is the LLC, and because many people who seek to obtain a license to own and operate an Arizona medical marijuana dispensary may form an Arizona LLC for that purpose, the question is does an LLC that seeks a license to own and dispensary need to adopt Bylaws?

The answer to that questions is Yes!  Arizona Revised Statutes Section 36-2806.A states: “The Bylaws of a registered nonprofit medical marijuana dispensary shall contain such provisions relative to the disposition of revenues and receipts to establish and maintain its nonprofit character.”  The rules of the Arizona Department of Health Services also require Bylaws and that the Bylaws contain certain provisions. Therefor, the law requires the dispensary to have Bylaws so you must make sure your nonprofit entity adopts ADHS acceptable Bylaws.

By |2012-05-13T16:26:38-07:00December 27th, 2010|Legal Issues, Questions People Ask|Comments Off on Bylaws – We Don’t Need No Stinking Bylaws or Do We?

Legal Concerns Spur Oakland’s Suspension of Plan for Four Big Pot Farms

Los Angeles Times:  “Oakland —California’s most cannabis-friendly city has temporarily suspended a plan to permit and tax four large marijuana-growing facilities because of ongoing legal concerns.  The Oakland City Council voted 7 to 1 this week to send the measure back to legal staff for reworking after the city received a letter from the Alameda County district attorney”  The DA said:

“It remains an open question whether public officers or public employees who aid and abet or conspire to violate state or federal laws in furtherance of a city ordinance, are exempt from criminal liability”

By |2019-06-14T08:24:50-07:00December 24th, 2010|California News|Comments Off on Legal Concerns Spur Oakland’s Suspension of Plan for Four Big Pot Farms

Juries are Giving Pot Defendants a Pass

Los Angeles Times:  “In cases involving small amounts of marijuana, some people aren’t willing to uphold the law in court. . . . a phenomenon that prosecutors say they are increasingly mindful of as marijuana use wins growing legal and public tolerance: Some jurors may be reluctant to convict for an offense many people no longer regard as serious.  ‘It’s not on a level where it’s become a problem.  But we’ll hear, ‘I think marijuana should be legal, I’m not going to follow the law’ “

By |2019-06-14T08:24:50-07:00December 24th, 2010|California News|Comments Off on Juries are Giving Pot Defendants a Pass

Arizona Police can do Little to Prepare for New Pot Law

Arizona Republic:  “With state health officials still designing rules to regulate the cultivation, distribution and possession of medical marijuana, police departments in Arizona say there is little they can do to prepare to enforce the law until those guidelines are complete.”

By |2010-12-24T02:36:37-07:00December 24th, 2010|Stories & Articles|Comments Off on Arizona Police can do Little to Prepare for New Pot Law

Possible Class Action Lawsuit vs. ADHS to Eliminate Arizona Residency Requirement

Possible Class Action Lawsuit Against the Arizona Department of Health Services

Several non-Arizona residents who want to apply for and obtain a license to operate a medical marijuana dispensary in Arizona have asked me if I would file a class action lawsuit against the Arizona Department of Health Services to force it to eliminate the requirement that all officers and directors of the dispensary be Arizona residents.  This requirement was invented by ADHS without any basis.  I am not aware of any other Arizona business that Arizona law requires that the owners be Arizona residents.

The people who have asked me about a lawsuit would like to share the cost of the lawsuit.  If you are interested in being a co-plaintiff in a class action lawsuit vs. the ADHS to eliminate the Arizona residency requirement, complete our comment form and I will contact you and put you on my list of possible co-plaintiffs.

By |2015-04-06T18:49:23-07:00December 23rd, 2010|Legal Issues|Comments Off on Possible Class Action Lawsuit vs. ADHS to Eliminate Arizona Residency Requirement

Must an Arizona Medical Marijuana Dispensary be a Nonprofit Corporation?

Question:   Must an Arizona Medical Marijuana Dispensary be a Nonprofit Corporation?

Answer: Apparently not!  Although the text of Proposition 203 says that an Arizona medical marijuana dispensary must be a ““a not-for-profit entity that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, supplies, sells or dispenses marijuana or related supplies and educational materials to cardholders,” and it refers to Bylaws (a corporate governing document), officers (typically associated with corporations) and directors (exclusively associated with corporations), the Arizona Department of Health Services expanded the definition of not-for-profit entity to include types of entities in addition to corporations.

The December 17, 2010, first draft of the proposed DHS rules states that an “Entity means a person as defined in A.R.S. § 1-215.”  Section 1-215 says that “Person” includes a corporation, company, partnership, firm, association or society, as well as a natural person.”  Since an Arizona limited liability company is a company, DHS apparently will allow LLCs to own dispensaries unless it changes the rules to eliminate LLCs.  Here is an additional provision in the first draft of the rules that sanctions the use of a limited liability company:

“R9-17-301. Individuals to Act for a Dispensary Regarding Requirements.  When a dispensary is required by this Article to provide information on or sign documents or ensure actions are taken, the following shall comply with the requirement on behalf of the dispensary: . . . 4. If the dispensary is a limited liability company, a manager or, if the limited liability company does not have a manager, a member of the limited liability company”

As an Arizona business and entity formation attorney who has formed over 2,800 Arizona entities, I am surprised, but very glad that DHS is not requiring that people form Arizona nonprofit corporations to own and operate medical marijuana dispensaries.  The only type of entity that is specifically recognized under Arizona as a nonprofit entity is the Arizona nonprofit corporation.  The big problem with an Arizona nonprofit corporation is that it does not have any owners.  It simply would not be right for the government to require people to spend substantial amounts of time and invest large amounts of money into a nonprofit corporation that does not have any owners.

If you want more background and analysis of this nonprofit entity issue, read my article called “Arizona Proposition 203 – Legalization of Medical Marijuana.”

Arizona Medical Marijuana Dispensaries Should be Arizona Limited Liability Companies

My recommendation is that all entities that seek to obtain a license to operate an Arizona medical marijuana dispensary be Arizona limited liability companies.  People who have already formed an Arizona nonprofit corporation with the intent to have it obtain the license should put the corporation on the shelf and form a new Arizona LLC to be the nonprofit entity that seeks and obtains the license.

I would love to form your Arizona LLC that will own and operate a medical marijuana dispensary.  My fee is $1,599, which includes the all important nonprofit LLC Bylaws.  See my articles called “Why Every Arizona Medical Marijuana Dispensary Must Have a Buy Sell Agreement,” “Bylaws – We Don’t Need No Stinking Bylaws or Do We?” and “Bylaws for Arizona Medical Marijuana Dispensaries.”

By |2017-02-12T07:05:51-07:00December 23rd, 2010|Legal Issues, Questions People Ask|2 Comments

Sedona’s Time Line for Adopting Medical Marijuana Zoning

Here’s Sedona’s time line for adopting its medical marijuana zoning ordinance:

Planning and Zoning Commission Discussion:

Tuesday, January 4, 2011- 5:30 p.m. in City Hall Council Chambers
Thursday, January 13, 2011 – 3:30 p.m. in Vultee Conference Room

Planning and Zoning Commission Public Hearing and possible recommendation to City Council:

Tuesday, January 18, 2011 – 5:30 p.m. in Council Chambers

City Council Public Hearings and possible adoption:

Tuesday, February 8, 2011 – 4:30 p.m. in Council Chambers (tentative)
Tuesday, February 22, 2011 – 4:30 p.m. in the Council Chambers (tentative)

By |2012-08-18T10:06:53-07:00December 23rd, 2010|Stories & Articles, Zoning|Comments Off on Sedona’s Time Line for Adopting Medical Marijuana Zoning

DHS Says Dispensaries Can Be Limited Liability Companies

Good news.  The first draft of the proposed Arizona medical marijuana rules issued by the Arizona Department of Health Services on December 17, 2010, says that the entity that owns and operates a medical marijuana dispensary can be a limited liability company (the preferred entity of choice in Arizona), a corporation, sole proprietorship (a mistake), general partnership (a mistake) or a limited partnership (not a mistake, but somewhat obsolete in Arizona).

Although the nonprofit corporation is the only type of entity recognized by Arizona statutory law as a nonprofit entity, the ADHS correctly did not interpret the language of Proposition 203 as requiring that medical marijuana dispensary nonprofits be Arizona nonprofit corporations.  The biggest problem with a nonprofit corporation used for a business is that nobody actually owns an Arizona nonprofit.  See my June 6, 2010, article  called “Arizona Proposition 203 – Legalization of Medical Marijuana” on whether MMD nonprofits must be Arizona nonprofit corporations in which I stated:

“Proposition 203 creates a big problem for people who are contemplating creating an MMD?  The $64,000 question is must an Arizona MMD be created as an Arizona nonprofit corporation or can it be one of the types of entities typically formed to make a profit, but operated as a nonprofit entity?  We will not know the answer to this question until DHS gives us the answer or it approves MMDs that are not Arizona nonprofit corporations.”

If you need an Arizona attorney to form your Arizona LLC, see the links on the right column of this website and hire Arizona medical marijuana attorney Richard Keyt, aka the Arizona medical marijuana lawyer, to form your Arizona LLC.

By |2011-01-18T19:26:35-07:00December 21st, 2010|Legal Issues, Stories & Articles|Comments Off on DHS Says Dispensaries Can Be Limited Liability Companies

Benson: Cautious Approach on Pot Zoning Issue

San Pedro Valley News Sun:  “The City of Benson is taking a wait and see approach, as the state continues to sort out guidelines and code regulations for the medical marijuana measure passed by Arizona voters in November. . . . Luis Garcia, the city’s building official, said . . .  Benson . . . will wait to propose a set of regulations before the Planning and Zoning Commission, or the City Council.”

By |2015-04-06T18:49:23-07:00December 21st, 2010|Zoning|Comments Off on Benson: Cautious Approach on Pot Zoning Issue

Call for Public Comment to the Proposed Medical Marijuana Rules

Arizona Department of Health Services Asks Public to Comment on the Proposed Medical Marijuana Rules

One of the top priorities during the implementation of the Arizona Medical Marijuana Act in the coming months is to ensure good rules are developed (called Administrative Code) so medical marijuana can be regulated effectively. Rules that are clear, objective, well-researched, and that balance competing interests are absolutely critical in order to effectively implement a responsible medical marijuana program.

The goal is to develop rules that will ensure qualified patients have access to marijuana for their medical condition while preventing (to the extent possible) recreational marijuana users from accessing marijuana through the Act’s provisions. In addition, the rules should ensure that marijuana dispensaries act responsibly and have adequate security and inventory controls.

In order to achieve these goals we need your help. Input is needed from all Arizona residents so the most responsible set of regulations are in place to balance competing interests. Please consider reviewing the informal draft rules, either individually or with other members of your community, and submit your feedback using the electronic comment form. For additional information and tips on how to provide input, review Director Humble’s Call for Public Comment.

By |2015-04-06T18:49:23-07:00December 21st, 2010|Dept Health Services, DHS Rules|Comments Off on Call for Public Comment to the Proposed Medical Marijuana Rules

Must My Nonprofit Arizona Medical Marijuana Dispensary Be a Federal Tax-exempt Organization?

Question:  Must My Nonprofit Arizona Medical Marijuana Dispensary Be a Federal Tax-exempt Organization?

Answer:  No and thankfully no!  Arizona Revised Statutes Section 36-2806.A states: “A registered nonprofit medical marijuana dispensary need not be recognized as tax-exempt by the Internal Revenue Service.”  If Proposition 203 required dispensaries to become tax-exempt organizations, the IRS would deny every application because it would not allow any business engaged in violating federal law to become exempt from federal income taxes.  In addition, even if it were possible for a dispensary to obtain a tax exemption, the consequences would be disastrous for most dispensaries.  Tax-exempt organizations are prohibited from paying excess benefits to owners, directors, officers and insiders.  If excess benefits are paid, the tax penalties are severe – 100% of the excess benefit PER YEAR since the payment until the penalty is paid in full.

By |2017-02-11T17:03:09-07:00December 20th, 2010|Legal Issues, Questions People Ask, Tax Issues|Comments Off on Must My Nonprofit Arizona Medical Marijuana Dispensary Be a Federal Tax-exempt Organization?

Arizona Medical Marijuana Proposed Rules Released

Arizona Republic:  “The state health department released its first draft late Thursday, providing a glimpse at how the program may work in Arizona.  The rules spell out who may qualify for medical marijuana, establish operating criteria for dispensaries and provide strict guidelines for doctors who may recommend marijuana.”  Read the December 17, 2010, first draft of Arizona Department of Health Services’ proposed Medical Marijuana Regulations and DHS’ Call for Public Comment and Electronic Comment Form.

By |2011-01-18T19:28:11-07:00December 18th, 2010|Stories & Articles|Comments Off on Arizona Medical Marijuana Proposed Rules Released

Proposed Rules on Medical Marijuana Tougher Than Voter-Approved Law; Estimate of Potential Patients Lowered

Phoenix New Times:  “Before the release of draft rules on Proposition 203, Will Humble, the director of the state Department of Health Services, estimated 100,000 people a year might qualify for medical marijuana.  Now, under the proposed regulations, only 10,000 to 20,000 people a year would qualify, he said in a news conference today. . . . The voters approved Proposition 203, and now the state wants to smother the new law with over-bearing rules.”

By |2010-12-20T19:56:17-07:00December 17th, 2010|DHS Rules, Stories & Articles|Comments Off on Proposed Rules on Medical Marijuana Tougher Than Voter-Approved Law; Estimate of Potential Patients Lowered

Department of Health Services Issues Proposed Medical Marijuana Rules

Proposed Arizona Medical Marijuana Rules / Regulations Issued by the Arizona Department of Health Services on December 17, 2010

Arizona Governor Jan Brewer signed a proclamation on December 14, 2010, that caused Arizona Proposition 203 to become law as of the following day.  The Arizona Department of Health Services now has 120 days ending on April 14, 2010, to prepare regulations that govern Arizona’s brand new medical marijuana patients and the dispensing and growing industry.  Today, December 17, 2010, DHS issued the first draft of its proposed Title 9, Health Services Chapter 17.Department of Health Services – Medical Marijuana Program.  Here are some of the interesting revelations I found in my quick skim through the proposed regulations:

  • “Entity” means a person as defined in A.R.S. § 1-215., which states:

“Person” includes a corporation, company, partnership, firm, association or society, as well as a natural person. When the word “person” is used to designate the party whose property may be the subject of a criminal or public offense, the term includes the United States, this state, or any territory, state or country, or any political subdivision of this state that may lawfully own any property, or a public or private corporation, or partnership or association. When the word “person” is used to designate the violator or offender of any law, it includes corporation, partnership or any association of persons.”

  • Each dispensary must have a “Medical director” who is a doctor of medicine who holds a valid and existing license to practice medicine pursuant to A.R.S. Title 32, Chapter 13 or its successor or a doctor of osteopathic medicine who holds a valid and existing license to practice osteopathic medicine pursuant to A.R.S. Title 32, Chapter 17 or its successor and who has been designated by a dispensary to provide medical oversight at the dispensary.
  • Dispensary registration fee = $5,000
  • Dispensary renewal fee = $1,000
  • Fee to change the location of a dispensary = $2,500
  • Fee to change the location of a cultivation site = $2,500
  • Fee to get or renew a qualifying patient card = $150
  • Fee to get or renew a designated caregiver card = $200
  • Fee to get or renew a dispensary agent card = $200
  • A registration packet for a dispensary is not complete until the applicant provides the Department with written notice that the dispensary is ready for an inspection by the Department.
  • Officers and board members of a dispensary must give DHS a copy of their Arizona driver’s license
  • Number of working days applicable to applications for a dispensary:  overall time frame = 90; time for applicant to complete application = 90; admin completeness 30; substantive review time = 60

Regulations Applicable to Arizona Medical Marijuana Dispensaries

  • Dispensaries can be individuals, corporations (for profit and nonprofit), limited liability companies, partnerships, joint ventures and any other business organization
  • Each principal officer or board member of a dispensary is an Arizona resident and has been an Arizona resident for the two years immediately preceding the date the dispensary submits a dispensary certificate application.”  I am very surprised by this requirement.  Proposition 203 does not contain any language that restricts who can own a dispensary or that requires owners be residents of Arizona or any other state or country.
  • The application must state whether a principal officer or board member:

1.  Is a physician currently making qualifying patient recommendations

2.  Has not provided a surety bond or filed any tax return with a taxing agency – This does not make any sense.

3.  Has unpaid taxes, interest, or penalties due to a governmental agency.

4.  Has an unpaid judgment due to a governmental agency.

5.  Is in default on a government-issued student loan.

6.  Failed to pay court-ordered child support.

7.  Is a law enforcement officer.

8.  Is employed by or a contractor of the Department

  • The application must state the name and license number of the dispensary’s medical director
  • The application must state if the dispensary and, if applicable, the dispensary’s cultivation site are ready for an inspection by the Department
  • The application must state if the dispensary and, if applicable, the dispensary’s cultivation site are not ready for an inspection by the Department, the date the dispensary and, if applicable, the dispensary’s cultivation site will be ready for an inspection by the Department
  • The application must state the name and title of each principal officer and board member
  • The application must contain a copy of the business organization’s articles of incorporation, articles of organization, or partnership or joint venture documents, if applicable.
  • The application must contain an attestation signed and dated by the principal officer or board member that the principal officer or board member is an Arizona resident and has been an Arizona resident for at least two consecutive years immediately preceding the date the dispensary submitted the dispensary certificate application.
  • The application must include a copy of the certificate of occupancy or other documentation issued by the local jurisdiction to the applicant authorizing occupancy of the building as a dispensary and, if applicable, as the dispensary’s cultivation site.
  • The application must include a copy of the dispensary’s by-laws containing provisions for the disposition of revenues and receipts.
  • The application must include a business plan demonstrating the on-going viability of the dispensary as a non-profit organization.
  • The application must state whether a registered pharmacist will be onsite or on-call during regular business hours and if the dispensary will provide information about the importance of physical activity and nutrition onsite.
  • The dispensary must employ or contract with a medical director.
  • A dispensary shall cultivate at least 70% of the medical marijuana the dispensary provides to qualifying patients or designated caregivers.  This is a surprise and probably a problem and increased costs for many dispensaries.
  • A dispensary shall not provide more than 30% of the medical marijuana cultivated by the dispensary to other dispensaries.  Another surprise!
  • A medical director may only serve as a medical director for three dispensaries at any time.
  • The building used by a dispensary or the dispensary’s cultivation site shall have a flushable toilet with running water, soap in a dispenser and toilet tissue.
  • DHS will deny an application for a dispensary if a principal officer or board member:

1.   Is not a resident of Arizona or has not been a resident of Arizona for at least two consecutive years immediately preceding the date the application for the dispensary registration certificate is submitted.

2.  Is a physician currently making qualifying patient recommendations.

3.  Is a law enforcement officer.

4.  Is an employee of or a contractor with the Department.

  • The Department may deny an application for a dispensary registration certificate if a principal officer or board member of the dispensary:

1.  Has not provided a surety bond or filed any tax return with a taxing agency.

2.  Has unpaid taxes, interest, or penalties due to a governmental agency.

3.  Has an unpaid judgment owed to a governmental agency.

4.  Is in default on a government-issued student loan.

5.  Failed to pay court-ordered child support.

6.  Provides false or misleading information to the Department.

By |2017-02-12T07:05:50-07:00December 17th, 2010|Dept Health Services, DHS Rules, Legal Issues|Comments Off on Department of Health Services Issues Proposed Medical Marijuana Rules

Flag Drops on First Medical Marijuana Comment Period

Will Humble is the Director of the Arizona Health Services.  The following is from a December 17, 2010, post on his blog:

“One of our top priorities as we implement the AZ Medical Marijuana Act over the coming months is to ensure that we develop good Rules (called Administrative Code) so we can regulate medical marijuana effectively.  Rules that are clear, objective, well-researched, and that balance competing interests are absolutely critical in order to effectively implement a responsible medical marijuana program.  Our goal is to develop rules that’ll ensure qualified patients have access to marijuana for their medical condition while preventing (to the extent possible) recreational marijuana users from accessing marijuana through the Act’s provisions.  In addition, we want to develop Rules that ensure that marijuana dispensaries act responsibly and have adequate security and inventory controls.  In order to achieve these goals we will need your help.”

Read the entire post.

By |2015-04-06T18:49:23-07:00December 17th, 2010|Will Humble Speaks|Comments Off on Flag Drops on First Medical Marijuana Comment Period

Kingman P&Z Seeks More Information on Dispensary Rules

Kingman Daily Miner:  “Commissioners vote to send most restrictive zoning alternative to Council.  People interested in opening a medical marijuana dispensary within the city limit may be facing some strict guidelines. The city of Kingman Planning and Zoning Commission recommended adopting the most stringent out of three possible zoning recommendations for the dispensaries Tuesday night.”

By |2017-02-11T17:25:59-07:00December 16th, 2010|Stories & Articles, Zoning|Comments Off on Kingman P&Z Seeks More Information on Dispensary Rules