The IRS BANS GROUPS lobbying to legalize cannabis
It’s fairly obvious to anyone that has ever been involved in the marijuana industry that the Federal government has never been in favor of legalized cannabis. In fact, since the very first medicinal marijuana laws were passed by the state of New Mexico in the 1970s it has been fighting against decriminalization at the state level through every possible government agency available to them, from the FBI to the FDA. Now, it’s time for the IRS to play their part in the Feds’ game, and the latest statement from the Internal Revenue Service shows that they are ready to undertake the role of persecuting the marijuana industry in their own unique way.
The IRS – A Major Obstacle For The Cannabis Industry
While most industries tend to recognize the importance of the IRS, despite the irritations that it causes, when it comes to legal marijuana businesses, the IRS isn’t just a costly inconvenience, it’s an enormous obstacle which can make running their operation prohibitively expensive.
The Federal Government are experts at using tax code to damage the legal marijuana industry, primarily through the use of Section 280E, which bans basic business expenses from being deducted by any company which is involved in any way in the “trafficking” of schedule I or II substances such as marijuana.
The result of this is that numerous cannabis enterprises (and especially those which physically handle the herb itself) face punishing tax burdens of 70% or more, more than double the 30% corporate tax rate than the average business faces. This has led to legal cannabis businesses having to scale back their original plans or even completely withdraw from the industry when the true costs of taxation on their operation are realized.
However, the beginning of 2018 has seen a further escalation of the IRS’ attack on the legalized marijuana industry – they expanded onto a brand-new front: lobbying groups and not-for-profit organizations which have been formed for the purpose of promoting legal cannabis. Whether this means that long-standing advocacy non-profits that already exist will have their tax status reversed is unclear at present, however it remains a strong possibility. Whatever the case, the IRS are saying in their latest publication that if the primary purpose of a trade association is to advocate a schedule I substance (such as marijuana), its application will be denied on those grounds.
The Effect On Advocacy Organizations
This news does not bode well for trade organizations such as the National Cannabis Industry Association or for groups which push for a policy of decriminalization. The practical impact felt by groups that lose their non-profit status will be a whopping 21% in tax on their profits, something which will significantly reduce their efficacy as an organization, and even if existing organizations remain unaffected, if no new advocacy groups are able to set up, this could have a severely limiting effect on the burgeoning cannabis industry.
Resolution Is The Only Answer
For most influencers within the cannabis industry, this move of the IRS is yet another indicator of why resolution is so essential between the contradictions of state legalization and federal prohibition. Cannabis companies which are legal in their own state are still facing numerous obstacles due to federal law, with some of the major problems being an inability to obtain a bank account and the constant threat of a potential Department of Justice crackdown.
As the gap widens further between state and federal regulations due to the wider acceptance and legalization of cannabis across the nation, it seems only natural that federal legalization should follow. It is certainly clear that this move by the IRS does not reflect the general opinion of the majority of the American public, since 64% of US citizens have now given their support to medicinal marijuana.
It isn’t surprising that the cannabis industry as a whole is up in arms about the current administration’s actions since they are directly contradicting to the wishes of most Americans. They view the blocking of not-for-profit cannabis advocacy organizations whose sole purpose is to work towards a more responsible consumption of marijuana as a senseless act which stifles the creation of new jobs and the growth of the economy at a time when a boost would be most valuable. The stance taken by the IRS will affect and damage countless small companies and is, arguably, directly in violation of Federal Law itself, since IRS discrimination against political organizations is prohibited.