1) Oregon, Alaska Plan & Prepare for Legal Marijuana: How well each of these state legislatures and alcohol regulatory bodies work together will determine the success or failure of marijuana policy in these states. As it borders Washington, Oregon’s commercial and regulatory choices will be particularly crucial in understanding to what extent states may strive for market advantages vis-à-vis bordering states.
2) Identifying the Next States to Legalize: 2015 will show which states are serious about ballot initiatives in 2016. It’s widely expected that California will advance an initiative and Florida might take another swing at approving medical marijuana, after falling just short of approval in 2014.
3) Cannabis Policy & State Legislative Action: In some states, the battleground for enacting items like the legalization of recreational or medical marijuana is not the ballot box, but the state legislature.
4) Cannabis & the Courts: Multiple high-profile lawsuits surrounding marijuana policy may play out in 2015. For instance, Coats v. Dish Network [a Colorado lawsuit] may settle the issue of employer-sponsored marijuana testing and a Supreme Court case involving Nebraska and Oklahoma’s suing of Colorado over legalizing marijuana will indicate the willingness of federal courts to engage in this policy area.
5) Answers to Questions About D.C.’s Marijuana Policy: Clarity about the future of marijuana policy in Washington, D.C. will almost surely be left to the federal courts, particularly if there is congressional inaction on Initiative 71.
6) Colorado & Washington (& Uruguay) Continue Legalization: In Colorado, edibles, product testing, and homegrows will be on the agenda. The policy challenge Washington faces is that legal weed could be too costly to lure consumers from the black market. On the international front, Uruguay works hard to ready a bureaucracy and a consumer base for the experiment.
7) Data, Data, Data: One key takeaway for policy advocates, both supporters and opponents, will be to patiently wait to draw conclusions as the data are currently incomplete and imperfect. 2015 will offer steady flows of data from Colorado and Washington, and eventually other states.
8) Presidential Candidates & Cannabis: Marijuana policy will definitely be part of the 2016 conversation in a way that it has not in previous presidential campaigns. And the issue will be particularly interesting to watch as it does not fall neatly along party lines.
1. Legal adult-use sales begin in Colorado.
2014 kicked off with a bang with the historic opening of legal sales in Colorado. Under a tremendous media spotlight, the rollout was a remarkably smooth success. More than $573M in legal marijuana sales and $60M in state tax and fee revenue later*, the Colorado industry is proving that a legal, regulated market not only works, but works well. Crime is down. Tourism is up. Funds are rolling into Colorado schools and long overdue medical marijuana research. And perhaps just as importantly, when concerns do arise, a regulated market provides an opportunity to address those concerns.
*Revenue figures cover January through October, as November and December sales data are not yet available.
2. Federal officials release banking guidelines for serving the legal cannabis industry.
In February, officials with the Departments of Justice and Treasury released memos intended to provide guidance for financial institutions interested in providing banking for legal cannabis industry businesses. While the ultimate outcome of the memos was muted, and most cannabis businesses are still denied basic banking services, the memos nonetheless served as potent message that federal authorities recognized the banking crisis in the industry and were seeking solutions.
3. Congress passes the first-ever pro-marijuana provisions at the federal level.
In May, the Republican-majority House of Representatives easily passed two appropriations amendments designed to protect state-sanctioned marijuana businesses. One of those — the Rohrabacher-Farr amendment prohibiting the use of Department of Justice funds to interfere with legal medical marijuana programs — became law when it was included in the “cromnibus” budget that was approved by both the House and the Senate in December. Another, which would have forbidden the use of Department of Treasury funds to prosecute banks serving state-sanctioned cannabis businesses, passed by 39 votes in the House but was dropped during budget negotiations. NCIA lobbying efforts, together with the work of allied organizations, helped make these historic votes possible.
4. NCIA holds its first national Cannabis Business Summit, drawing 1,200 attendees to Denver.
In June, NCIA hosted the inaugural national Cannabis Business Summit at the Colorado Convention Center in downtown Denver. More than 1,200 cannabis industry professionals spent two days discussing innovation, responsibility, and the challenges and opportunities in building an industry to be proud of. The Cannabis Business Summit returns to Denver in 2015, with attendance expected to double.
5. Legal adult-use sales begin in Washington state and quickly outpace revenue projections.
July saw the opening of legal adult-use sales in Washington state, and legal cannabis businesses are already bringing in more tax revenue than the state projected. Significant differences between the policy designs in Colorado and Washington made the two states’ rollouts proceed at different paces, but ultimately Washington’s experience is again confirming that legal adult-use markets are safe, viable, and effective ways to approach marijuana policy.
6. Midterm voters legalize adult-use marijuana in Alaska, Oregon, and D.C.
Despite a midterm election with extremely low turnout and a huge wave of conservative victories, voters approved adult-use legalization in Alaska, Oregon, and Washington, D.C., and notched very strong support for medical marijuana in Florida, falling just short of the 60% threshold needed for passage. Given the political dynamics of the 2014 election, it’s clear that support for marijuana policy reform crosses political and ideological lines and that voters of all stripes are increasingly calling for a smarter, safer alternative to marijuana prohibition. It’s a trend that will likely grow even stronger in the 2016 electorate.
IRS Guidance Coming for Practitioners Preparing Returns for Marijuana Retailers
BNA Daily Tax Report by Casey Wooten
November 20, 2014
Tax preparers whose clients include marijuana retailers will get some guidance in early 2015 on how to perform due diligence and stay on the right side of the law, an official from the IRS Office of Professional Responsibility said.
It's important for the OPR to make a statement on ethical practices for preparers in the growing number of states where marijuana is legal, OPR Director Karen Hawkins said Nov. 19 at a public meeting of the Internal Revenue Service Advisory Council.
“I'm going to stay away from the controlled substances issue and focus on what the tax courts have said, so cost of goods sold is in play, but anything else that's in play is going to depend on whether it's part of the trade or business of cultivating or sale, or whether it's a subsidiary trade or business that just happens to have a connection,”Hawkins told Bloomberg BNA.
Tax Compliance Headache.
In recent years, states such as Colorado and Washington have legalized recreational marijuana use, while California, Washington, D.C., and others have either decriminalized it or decided to allow it for medical use. Marijuana sales are still illegal under federal law, however.
Because of federal anti-money laundering rules, banks are reluctant to service marijuana retailers, who in turn must operate their businesses mostly in cash. This can create a headache from a tax compliance perspective, making it difficult for businesses to use government services such as the Electronic Federal Tax Payment System.
In July, Sen. Michael Bennet (D-Colo.) and Rep. Ed Perlmutter (D-Colo.) wrote to IRS Commissioner John Koskinen, asking him to stop the agency from penalizing marijuana businesses from paying their employees' withholding taxes in cash (135 DTR G-3, 7/15/14).
Much like banks, practitioners are concerned that preparing returns for marijuana growers could lead to legal trouble, Janeen Ryan, a member of the advisory council, said.
“We were approached by people that are professionals and 230 legacy preparers and they said ‘we are concerned to even do their returns,”'said Ryan, who helped write the annual advisory report section on marijuana retailers.
The IRS can't change Tax Code Section 280E, which prevents deductions or credits for expenses if a business is involved in the trafficking of controlled substances; that change requires congressional action.
Until then, marijuana retailers are only able to deduct for the cost of goods sold, Ryan said.
But the agency can issue a clarification that preparers' practices won't be affected.
In their report, members of the advisory panel suggested that the IRS publish guidance clarifying that a tax professional won't be considered unethical, targeted for audit or considered in violation of Circular 230 rules solely for preparing a return for a marijuana business.
Hawkins said there are court cases defining what kind of deductions marijuana retailers can take that will help her shape the guidance on this issue.
She referred to a 2007 case, Californians Helping to Alleviate Medical Problems Inc. v. Commissioner, in which the U.S. Tax Court ruled that Section 280E didn't prevent a California organization providing medial marijuana from deducting expenses related to a separate part of the businesses (94 DTR K-1, 5/16/07).
“Within those parameters what we would essentially be saying to the preparers in those states is that you've got some hard conversations to have with your clients about what goes on to the tax return, but as long as you are adhering to what the tax law says about treatment, you're going to be within the confines of what Circular 230 expects of your due diligence,” Hawkins said.
To view a complete list of all articles relating to OPR visit OPR Press at www.irs.gov.
DEA spokesman Lawrence Payne tells NPR that Sinaloa operatives in the United States are reportedly buying high-potency American marijuana in Colorado and smuggling it back into Mexico for sale to high-paying customers.
"It makes sense," Payne says. "We know the cartels are already smuggling cash into Mexico. If you can buy some really high-quality weed here, why not smuggle it south, too, and sell it at a premium?"
I’ve gotten to know some of the folks here in Colorado. There’s some different laws out here in Colorado. Pizza business is pretty good out here, believe it or not, due to some recent law changes.
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