Marijuana Raid at West Valley Patients Group
LA Weekly: “Another medical marijuana dispensary was raided in the West San Fernando Valley this week for … selling pot.”
Tax Court in Olive vs Commissioner Allows Deductions for Cost of Goods Sold
On August 2, 2014, the Tax Court held that: (i) Martin Olive underreported gross receipts from the sales of medical marijuana by the Vapor Room medical marijuana dispensary, (ii) IRS Section 280E prevented him from deducting business related expenses, and (iii) he was liable for accuracy-related penalties. The court did allow Olive to deduct his cost of goods sold. The case is Olive v. Commissioner, 139 T.C. No. 2 (Aug. 2, 2012). The court said:
“A vaporizer is an expensive apparatus that extracts from marijuana its principal active component and allows the user to inhale vapor rather than smoke. Petitioner chose the name of his business to publicize that the Vapor Room had the requisite equipment to allow patrons to vaporize marijuana there. …
Petitioner’s testimony and the testimony of his other witnesses was rehearsed, insincere and unreliable. We do not rely on petitioner’s testimony to support his positions in this case, except to the extent his testimony is corroborated by reliable documentary evidence. We also do not rely on the uncorroborated testimony of petitioner’s other witnesses, three of whom are (or were) patrons of the Vapor Room and all of whom are closely and inextricably connected with the medical marijuana industry and with a desired furtherance of that movement. …
We hold that the Vapor Room’s gross receipts for the respective years were $1,967,956 and $3,301,898. …
We conclude that the Vapor Room’s COGS for each year at issue equals 75.16% of the Vapor Room’s gross receipts for the year, as further adjusted to take into account our finding that petitioner gave away 6.5% of the Vapor Room’s purchases. …
The parties agree that § 280E disallows deductions only for the expenses of a business and not for its COGS. … [We] reject petitioner’s contention that § 280E does not apply because the Vapor Room was a legitimate operation under California law. We have previously held that a California medical marijuana dispensary’s dispensing of medical marijuana pursuant to the CCUA was “trafficking” within the meaning of § 280E. [Californians Helping to Alleviate Med. Problems, Inc. v. Commissioner (CHAMP), 128 T.C. 173 (2007).] That holding applies here with full force. …
Respondent argues that petitioner is liable for the accuracy-related penalty to the extent he has understated the Vapor Room’s gross receipts and failed to substantiate the Vapor Room’s COGS and expenses. Petitioner’s sole argument in brief is that the penalty does not apply because, he states, any inaccuracy underlying an understatement was “accidental, not substantial, and/or not negligent on the part of the taxpayer.” Petitioner asserts that the Vapor Room was his first business and that he was not instructed on the proper way to keep the books and records of a business. We agree with respondent that the accuracy-related penalty applies in this case.”
Feds Shut Down Two More San Francisco Medical Marijuana Dispensaries
NBC Bay Area: “A pair of San Francisco prominent medical marijuana businesses closed their doors Tuesday, a sign of the federal government’s recent crackdown on medical cannabis dispensaries. HopeNet and the Vapor Room announced they would cease operations in response to threatening letters sent to the business’ landlords by the federal government. ‘The Justice Department sent our landlord one of those nasty letters,’ said HopeNet co-founder Catherine Smith. ‘So this is our D-Day, we have to leave’. . . . Since November, the Justice Department has sent out 600 letters across California threatening landlords who rent space to medical marijuana operations.”
Federal Prosecutors’ Threats to Seize Land Close Three Washington Medical Marijuana Dispensaries
The Wenatchee World: “Three medical marijuana shops in the Wenatchee area have closed after federal prosecutors threatened to seize the properties and to fine or prosecute the landlords. Medical marijuana store operator Eric Cooper says the letters last week from Eastern Washington U.S. Attorney Michael Ormsby prompted three existing dispensaries to close immediately. He says the fourth shop in the area is staying open a little longer but also intends to close.”
13 Arizona County Attorneys Ask Governor Brewer to Stop Medical Marijuana Dispensaries
Arizona Republic: “Thirteen Arizona county attorneys are urging Gov. Jan Brewer to halt the state’s medical-marijuana program, saying state employees will be facilitating federal crimes when they issue licenses to pot dispensaries. The lawyers signed onto a three-page July 24 letter authored by Yavapai County Attorney Sheila Polk, who requests that the governor prevent the state’s issuance of licenses for medical-marijuana dispensaries because the state program is pre-empted by the federal Controlled Substances Act. . . . Polk wrote that she has been told Arizona’s newly appointed U.S. Attorney John Leonardo ‘fully intends to prevent any dispensaries from operating in Arizona by seizing each and every one as it opens and commits violations’ of the federal act.”
Read Yavapai County Attorney Polk’s letter to Brewer and Governor Brewer’s response in which she makes this incredible statement:
“though the Department of Justice has prosecuted a select number of large medical-marijuana operations in California and other states, the federal government’s position remains unclear with regard to the AMMA and participation in this law by Arizona State employees.”
Apparently Governor Brewer forgot she got a February 16, 2012, letter from then U.S. Attorney for Arizona Ann Birmingham Sheel that contained the following warning statements:
“compliance with the AMMA and Arizona regulations will not provide a safe harbor or immunity from federal prosecution for anyone involved in the cultivation and distribution of marijuana. . . . state employees who conduct activities authorized by the AMMA are not immune from liability under the CSA.”
Governor Brewer appears to be unaware of the reality and scope of federal dispensary attacks. On July 20, 2012, SF Gate wrote an article entitled “Court rulings bode ill for medicinal pot” that states “approximately 400 dispensaries in California have closed since the four U.S. Attorneys began their coordinated crackdown in September.” Four hundred shut downs is more than a “select number.” That number is more than four times the number of dispensary licenses the Arizona Department of Health Services will award. The 400 California dispensary closures includes dispensaries of all sizes, not just large ones.
Why did Governor Brewer respond to the 13 county attorneys without apparent input from Arizona Attorney General Thomas Horne? Where does Arizona’s top attorney stand with respect to the issues raised by the 13 county attorneys in their letter?
Court Rulings Bode Ill for Medicinal Pot
SF Gate: “the U.S. Justice Department said that federal courts in all four California judicial districts have rejected appeals by dispensaries threatened with shutdown. The most recent rejection came this month, when a federal court in Oakland rejected appeals filed by the Marin Alliance for Medical Marijuana in Fairfax, the Medthrive Cooperative and the Divinity Tree Patients’ Wellness Cooperative in San Francisco, and Medthrive’s landlords. Similar appeals by dispensaries in Sacramento, Butte County and Los Angeles County were rejected earlier this year. . . . All told, approximately 400 dispensaries in California have closed since the four U.S. Attorneys began their coordinated crackdown in September”
Arizona’s Medical-pot Program Far from Model
Arizona Republic: “Arizona’s Medical Marijuana Act was narrowly passed by voters in November 2010. The director of the Arizona Department of Health Services states that we have a ‘model’ program and that the demographics of the card users show ‘the vast majority are legitimately accessing the system’ (Valley & State, July 20). Do the facts really support these claims? . . . It is only a matter of time before the same dispensaries licensed by Arizona officials will be shut down by our U.S. attorney.”
Obama Trip Draws Marijuana Protests
U.S. Politics & Policy: “Supporters of medical marijuana protested over President Barack Obama’s fund-raising visit to Oakland, California this week, vowing to pull their votes for the incumbent because of a recent federal crackdown on cannabis dispensaries. . . . ‘We’re asking President Obama to call off this unauthorized war on medical cannabis’.”
Will Humble’s Radio Interview
On July 25, 2012, Will Humble, Director of the Arizona Department of Health Services, was interviewed by Steve Goldstein of KJZZ radio.
Medical Marijuana Benefits in Dispute
Examiner.com: “University of Arizona study shows little or no evidence that medical marijuana is an effective treatment for anxiety, migraines, depression and post-traumatic stress disorder, a finding that could hinder efforts to expand the allowable uses for the drug in Arizona. The researchers, working on behalf of the state Department of Health Services, which oversees the state’s medical-marijuana program, reviewed dozens of scientific studies related to marijuana use for the four medical conditions and determined that most of the research was of little value in weighing the medicinal risks and benefits.”
See “DrugFacts: Is Marijuana Medicine?” that states: “the scientific evidence to date is not sufficient for the marijuana plant to gain FDA approval, and there are a number of reasons why”
L.A. City Council Bans Medical Marijuana Dispensaries
Los Angeles Times: “In what could be a turning point in the city’s seemingly unending battle to regulate the distribution of medical marijuana, the Los Angeles City Council voted unanimously Tuesday to ban all pot dispensaries, while also opening the door to possibly let some remain. Under the ban, all of the 762 dispensaries registered in the city will be sent letters ordering them to shut down immediately. Those that don’t comply may face legal action from the city.”
Status of Arizona Medical Marijuana Dispensary License Applications
Will Humble, Director of the Arizona Department of Health Services wrote the following on his blog on July 23, 2012:
“Most of the applicants for medical marijuana registration certificates have been able to correct deficiencies in their applications… and 460 of the 486 applications we received are now complete. Five applications have been withdrawn, 3 have been denied, 15 are pending, and 3 are on the clock to respond to requests for additional information.
The complete applications are currently being evaluated to determine which will be eligible and move on to the random selection process on August 7th. At least 25 applications will be allocated certificates without going through the random selection process because they’re the only application in their district (CHAA). We’ll be providing more information about the August 7th agenda in the next couple of weeks. We’ll probably be issuing 95-99 dispensary registration certificates in about 3 weeks.”
Judge Orders Arizona Department of Health Services Not to Reject Medical Marijuana Dispensary Application because Maricopa County Refuses to Issue Zoning Letters
Phoenix New Times: “A county judge has put a halt to a state Department of Health Services rule that is preventing the approval of a would-be medical-marijuana dispensary. White Mountain Health Center wants to open a dispensary in Sun City, but it can’t get the county to acknowledge or reject its request for zoning information. A state DHS rule requires such information for its dispensary applications. Today, Maricopa County Superior Court Judge Michael Gordon put that state rule on hold for White Mountain, enjoining the state from rejecting the company’s application for not complying with that rule.”
Read the Judges’ order in the case of “White Mountain Health Center, inc., v. County of Maricopa.”
Arizona Official Refuses to Expand Health Conditions for Medical Marijuana
East Valley Tribune: “State Health Director Will Humble refused Thursday to expand the conditions for which marijuana can be legally recommended. . . . Humble’s decision disappointed Suzanne Sisley. She is a physician with the Telemedicine Program at the UA College of Medicine and a specialist in internal medicine and psychiatry. She said that, despite the lack of formal full-blown scientific studies, she believes marijuana works. . . .Sisley said, though, the decision comes as no real surprise. She said that Humble, in demanding evidence from scientifically backed peer-reviewed studies, essentially set the requests to expand the medical marijuana program up for rejection. That’s because the National Institute for Drug Abuse, which controls the only legal supply of marijuana for medical research has consistently refused to give the go-ahead for the kind of studies Humble said he needs.”
See also the Arizona Republic’s interview of Will Humble on his decision to reject new conditions. Mr. Humble said:
“I’ll concede that the clinical-trial type of research is controlled by NIDA (National Institute on Drug Abuse) and they are pretty strict when it comes to clinical trials, when it comes to the use of testing medical marijuana. But there are all kinds of studies that can be conducted that don’t need NIDA approval.”
Arizona Department of Health Services Rejects Petitions to Add New Conditions for Obtaining Medical Marijuana
The following is the text of a July 19, 2012, blog post by Will Humble, the Director of the Arizona Department of Health Services:
“The voter approved list of conditions that already qualify patients for an AZ Medical Marijuana Registration Card (with a doctor’s certification) includes any of the following: any chronic or debilitating disease or medical condition (or its treatment) that causes severe and chronic pain, severe nausea, severe and persistent muscle spasms, wasting, or seizures, cancer, glaucoma, HIV, Hepatitis C, ALS, Crohn’s disease, agitation of Alzheimer’s disease. The AZ Medical Marijuana Act also requires us to periodically accept petitions to permanently add new medical conditions to the list of conditions that qualify folks for a card.
We accepted petitions from the public to add new medical conditions back in January. Folks submitted numerous articles as a part their petitions for PTSD 1; PTSD 2; Depression; Migraines; and Generalized Anxiety Disorder. We also received lots of informal comments regarding adding PTSD; Depression; Migraines; Generalized Anxiety Disorder and General comments. We also heard in person testimony from dozens of folks at our public hearing in May.
Because my guiding principle for making the decision was to use science and research, we contracted with the U of A College of Public Health to do an evidence review of published scientific studies to help us to make a more informed decision. You can see the UA’s analyses for Depression; Generalized Anxiety Disorder; Migraine Headaches; and Post Traumatic Stress Disorder (PTSD) on our petition website. The UA used the GRADE methodology to evaluate the quality of the studies looking at the benefits and harms of using Cannabis to treat or provide relief for the conditions that were petitioned to add to the list of qualifying conditions for a Medical Marijuana Registration card. Also, our ADHS Medical Advisory Committee reviewed and analyzed the data and provided me with recommendations earlier this week.
We heard and received a host of moving stories from the public both on-line and during our a public hearing in May. Many of the commenters and folks that testified self-reported that they believe Cannabis provided relief for the petitioned conditions. However, our literature review found limited scientific evidence to document whether Cannabis is helpful or not for the petitioned conditions or that support permanently adding the petitioned conditions to the statutory list of qualifying debilitating conditions identified in the Act. In short- I didn’t approve the petitions because of the lack of published data regarding the risks and benefits of using Cannabis to treat or provide relief for the petitioned conditions.
However, some of the petitioned conditions (such as migraine headaches) already qualify patients for a medical marijuana registration card if they cause severe and chronic pain, severe nausea, severe and persistent muscle spasms, wasting, or seizures.
Whatever you think of the decision, just know that our team and I really took an objective and close look at the scientific evidence before making this decision. And remember, the Act provides for a judicial review of this decision and a continuing petition process. In fact, we’ll be accepting petitions again next week.”
DEA Raids Lake Elsinore Medical Marijuana Dispensary
The Press Enterprise: “Federal agents raided a medical marijuana dispensary in unincorporated Lake Elsinore on Tuesday, July 17, the second time the operation was hit in three months. Drug Enforcement Administration agents served a federal search warrant at Compassionate Patients Association, in the 17500 block of Grand Avenue. No arrests were made.”
Harborside Health Center’s Steve DeAngelo Video Interview
Fox Business News: “Feds Crack Down on California Medical Marijuana Clinics, but Harborside Health Center executive director Steve DeAngelo argues his marijuana clinics obey the law.
U of Arizona Study Says Medical Marijuana Benefits in Dispute
Arizona Republic: “A new University of Arizona study shows little or no evidence that medical marijuana is an effective treatment for anxiety, migraines, depression and post-traumatic stress disorder, a finding that could hinder efforts to expand the allowable uses for the drug in Arizona. The researchers, working on behalf of the state Department of Health Services, which oversees the state’s medical-marijuana program, reviewed dozens of scientific studies related to marijuana use for the four medical conditions and determined that most of the research was of little value in weighing the medicinal risks and benefits.”
Marijuana Has No Legit Medical Use, Feds Say; New SoCal Study Calls B.S.
LA Weekly: “Cannabis is a top, ‘Schedule I’ outlaw, which means it has ‘no currently accepted medical use in treatment in the United States, and there is a lack of accepted safety for use of the drug or other substance under medical supervision.’ This, of course, is patently untrue, seeing that doctors right here in this part of the United States have found plenty of accepted medical uses: Is this a case of law enforcement trumping science? A new research paper out of Southern California says yes. The paper, ‘Medical Marijuana: Clearing Away the Smoke,’ published in the latest Open Neurology Journal, concludes that there are plenty of medical uses for pot”
Here is the abstract of the paper:
“Recent advances in understanding of the mode of action of tetrahydrocannabinol and related cannabinoid in-gredients of marijuana, plus the accumulating anecdotal reports on potential medical benefits have spurred increasing re-search into possible medicinal uses of cannabis. Recent clinical trials with smoked and vaporized marijuana, as well as other botanical extracts indicate the likelihood that the cannabinoids can be useful in the management of neuropathic pain, spasticity due to multiple sclerosis, and possibly other indications. As with all medications, benefits and risks need to be weighed in recommending cannabis to patients. We present an algorithm that may be useful to physicians in determining whether cannabis might be recommended as a treatment in jurisdictions where such use is permitted.”
Medical Marijuana: Arizona Mulls Adding Qualifying Conditions
Arizona Republic: “Arizona health officials are considering adding post-traumatic stress disorder, depression, anxiety and migraines as qualifying conditions to use medical marijuana. Department of Health Services Director Will Humble is expected to decide this week. . . . The Republic turned to two Arizona activists to discuss whether the state should add post-traumatic stress disorder, depression, anxiety and migraines as qualifying conditions to use medical marijuana. Ingrid Joya oversees Elements Caregivers Collective, a medical-marijuana caregiver collective in northeast Phoenix. Carolyn Short is chairwoman of Keep Arizona Drug Free, an organization that opposed Proposition 203.”
Montana Men Sentenced for Selling Marijuana at a Montana Medical Marijuana Dispensary
Hungry Horse News: “Two more people connected with a medical marijuana business on Jellison Road were sentenced to prison in federal court, including the head of an operation prosecutors claim did business across the U.S. According to court documents, Christopher Durbin, 33, of Oregon and Whitefish, owned and operated several businesses in the Flathead Valley, including Four Seasons Gardening, Northern Lights Medical and Good Medicine Providers . . . . Prosecutors also claim Durbin deposited about $71,900 at Glacier Bank in 16 cash deposits ranging from $4,000 to $6,000 — structured small enough not to cause the bank to file a currency transaction report. Witnesses were prepared to testify that Durbin talked about the need to make deposits small enough to avoid the currency transaction reports.”
Owner Of First U.S. Marijuana Pharmacy Now Broke And Fighting IRS
Forbes: “Lynnette M. Shaw, the colorful pot activist who opened the first licensed medical marijuana dispensary in the United States, is fighting an Internal Revenue Service bill for $1.27 million in back income taxes and penalties and has filed for personal bankruptcy, listing $276,000 in state sales taxes among her debts. Shaw was forced to shut her Marin Alliance for Medical Marijuana in Fairfax, Ca. late last year, after U.S. Attorney for Northern California Melinda Haag wrote a letter to her landlord threatening to seize the building that housed her operation. The letter was part of a coordinated crackdown by four U.S. Attorneys in California on marijuana dispensaries . . . . The same crackdown led Haag to file two lawsuits this week seeking to seize buildings in Oakland and San Jose housing the state’s largest dispensary, Harborside Health Center”
Data to Expand Arizona Medical Marijuana Program Lacking
Arizona Capitol Times: “Requests to allow medical marijuana use in Arizona for additional medical conditions could be doomed by University of Arizona researchers’ reports that they found little or no scientific evidence to support the proposals. The state Department of Health Services hired university researchers to look for credible scientific articles and studies on harms and benefits of marijuana use for post-traumatic stress, migraine headaches, anxiety and depression.”
Read “Researchers find little evidence backing proposals to expand Arizona medical marijuana program.”
10 Applications Filed for a Medical Marijuana Dispensary in Payson
The Payson Roundup: “So far, 10 Valley-based companies or individuals applied to open a dispensary in Payson, while Globe received just one request. . . . Nature’s Harvest, a local collective that helps patients get marijuana cards, has applied for a dispensary certificate for its 404 S. Beeline Highway location.”
California Attorney General Tells CA Banks to Cease Doing Business with Marijuana Dispensaries
Toke of the Town: “This week the so-called invisible hand of the Feds struck again with their closed fist wantonly coming down on whomever they feel is in their way. This week’s Bay Area scorecard was 2-zip in their favor. They closed a favorite San Francisco dispensary and reminded any banking institution that does business with the pot shops that there will be unfair scrutiny for complying with the law. . . . our Cali Top Cop, in her infinite wisdom, stopped banks from doing business with dispensaries. . . . Here are the major ramifications of not being able to bank your business: there’s cash everywhere.”
Feds Sue to Take Land Occupied by Harborside Health Center, the Largest Medical Marijuana Dispensary in the US
Opposing Views: “California’s most well-known medical marijuana dispensary, Harborside Health Center, was served with a civil complaint for ‘forfeiture of property‘ on Monday for both of their locations in Oakland and San Jose. . . . The forfeiture action is against the ‘third-party’ property owner, Real Property and Improvements, and was filed by U.S. Attorney Melinda Haag, who last October announced with the other U.S. Attorneys an escalated campaign against medical marijuana dispensaries and growers. . . . Since the U.S. Attorney announcement last October, more than 400 dispensaries have shut down in California, mostly from the specter of federal criminal prosecution or asset forfeiture. At least 300 letters have been sent to property owners around the state, threatening federal action if they don’t evict their dispensary tenants. However, only about half a dozen such actions have been taken.”
Question for prospective Arizona medical marijuana dispensary owners, their landlords, Arizona Attorney General Tom Horne, Arizona Governor Jan Brewer and the Arizona Department of Health Services: Are you paying attention to what the federal government is doing to medical marijuana dispensaries and property owners who allow dispensaries to operate on their land? Read “Federal Dispensary Attacks.”
4 Employees of Tucson’s Green Halo Caregiver Collective Busted
KVOA.com: “The Green Halo caregiver collective, or GHCC, was incorporated as Green Halo LLC on April 25, 2011 with the purpose of distributing medicinal marijuana to patients for free. On Tuesday, four people working at the facility, at 3359 N. Freeway, were arrested for unlawful possession of marijuana and unlawful possession of marijuana for sale. After a two month investigation, police determined the marijuana was not really free.”
For more on the topic the legality of cannabis clubs under Arizona’s medical marijuana laws read “Are Arizona Cannabis Clubs Legal Under Arizona’s Medical Marijuana Laws?“
Credit Cards No Longer Accepted at Medical Marijuana Dispensaries
SF Weekly: “Your credit is no longer any good at California medical marijuana dispensaries, whose accounts with credit card processors have been canceled, thanks to pressure from the federal government. Merchant services providers — the intermediaries between retailers and credit card companies who process customers’ payments — began informing their medical marijuana dealing clients that cannabis credit card transactions would not be processed after July 1, according to Stephen DeAngelo, Executive Director of Oakland’s Harborside Health Center.”
Medical Condition Petition Status
Will Humble, Director of the Arizona Department of Health Services, wrote the following on July 6, 2012:
“The AZ Medical Marijuana Act requires us to periodically accept petitions to add new medical conditions to the list of conditions that qualify folks for an AZ Medical Marijuana Registration Card. In January, we accepted petitions from the public and had a public hearing in May. Folks submitted numerous articles as a part their petitions for PTSD 1; PTSD 2; Depression; Migraines; and Generalized Anxiety Disorder. We also received lots of informal comments regarding adding PTSD; Depression; Migraines; Generalized Anxiety Disorder and General comments.
We also contracted with the U of A to review published scientific studies related to marijuana use and the petitioned conditions. You can see the UA analyses for Depression; Generalized Anxiety Disorder; Migraine Headaches; and Post Traumatic Stress Disorder (PTSD) on our petition website. Our ADHS medical team will be meeting within the next week or so and will be providing me with their analysis and recommendations. The ultimate decision rests with me, the Director, and I have a decision deadline in late July.”
Cities Balk as Federal Law on Marijuana Is Enforced
New York Times: “Faced with growing chaos in the state’s medical marijuana industry, this city in Northern California passed an ordinance in 2008 that meticulously detailed, over 11 pages, how the drug could be grown and sold here. . . . Humboldt Medical quickly closed shop after federal prosecutors began shuttering hundreds of dispensaries in October in one of the biggest crackdowns on medical marijuana since its legalization in California in 1996. . . . City officials, afraid of becoming targets themselves of the prosecutors, have suspended the applications of two other dispensaries that were expected to be approved.”