IRS Investigates Colorado Pot Businesses – The struggle between federal prohibition of cannabis and legalized states continues: this time with a lawsuit from businesses in Colorado that allege the Department of Justice is attacking their livelihood through the Internal Revenue Services, bypassing federal laws that keep the DoJ from prosecuting federal anti-cannabis laws in states that have chosen to legalize.
The suit filed in U.S. District Court by Rifle Remedies, a medical marijuana business in Silt, CO, not the only one, challenges IRS subpoenas directed at Colorado’s Marijuana Enforcement Division. The subpoenas are seeking information about how much weed companies are growing, to whom it has been sold, and when: they’re trying to get their hands on information from Colorado’s extensive seed-to-sale program. The IRS claims that any concerns are irrational; their claim is that they need the information to properly tax the companies.
This is all also connected to the mess that is marijuana companies in legal states trying to navigate finances: since the federal government considers production and sale of the plant to be illegal trafficking, marijuana companies in states that have legalized can’t deduct expenses from their taxes and therefore have to pay taxes at rates multiple times higher than they would if the IRS didn’t view them this way. The IRS has responded that the companies won’t comply with providing the information, but companies can’t provide information without admitting to a federal felony. With the current political climate and a DoJ stubbornly opposing legalization, it could be risky.
The IRS also underwent training with the DEA that purportedly trained in criminal drug law investigation techniques in March of 2016, but attempts to utilize the Freedom Of Information Act to learn what exactly happened in those trainings have been rebuffed.
Regardless of whether the IRS truly is using this as a way to investigate recreational cannabis companies where the DoJ can’t due to legislation that prevents it from pursuing federal laws in states that have legalized cannabis, it’s just another illustration of how federal prohibition is causing serious financial conundrums for companies that are perfectly legal in their states.