420 College

The 420 College - Continuing Complications: Medical Marijuana vs. IRS

Sacramento’s evangelical medical marijuana provider, Canna Care, goes toe-to-toe with the taxman in court over out dated, and possibly unconstitutional penalties.


Fresno, CA -- (SBWIRE) -- 04/16/2014 -- Even in the cannabis pioneering state of California, the lines of legality get blurry when medical marijuana intersects with government. With the ever-changing, and often contradictory legislation at the state, federal, and local levels, it’s not uncommon for medical marijuana patients and businesses to get caught in the crossfire.

One organization recently under pressure is the Sacramento faith-based provider Canna Care, which is currently fighting a public court battle with the IRS in U.S. Tax Court in San Francisco. While they are not the first dispensaries the agency has set its sites on, Canna Care’s out right rejection of a negotiated settlement is making for a stand out case.

Lanette and Bryan Davies, directors of the non-profit organization, with the counsel of William McPike, an experienced medical marijuana attorney and cannabis business and law instructor at California’s 420 College, Canna Care is not backing down in San Francisco Tax Court, with supporting evidence ranging from as far back as 2006.

According to William McPike, using a dated tax code known as 280E, the IRS is pursuing tax penalties against Canna Care to the tune of $873,167. 280E IRC was put into effect in 1982, this law was enacted to penalize deductions on business expenses that purportedly support drug-trafficking operations.

Lanette and Bryan Davies, directors of the non-profit organization, and attorney McPike, are taking their case to the San Francisco Tax Court, with supporting evidence ranging from as far back as 2006 to present. They see the fines levied against them as punitive, and out of step for a non-profit operating legally in under California accords.

The California Industrial Hemp Farming Act was signed into law on last year by Gov. Jerry Brown. SB 566, a bill championed since 2005 by Sen. Mark Leno (D), defines industrial hemp as the "nonpsychoactive types of the plant Cannabis saliva L. and the seed produced there from, having no more than 3/10 of 1 percent of tetrahydrocannabinol (THC) contained in the dried flowering tops."

On August 29, 2013 the Deputy US Attorney General issued guidance (August 29 guidance) to federal prosecutors concerning marijuana enforcement under Controlled Substances Act (CSA). In furtherance of that memorandum, the August 29 guidance instructed Department attorneys and law enforcement to focus on eight priorities in enforcing the CSA against marijuana related conduct.

Since the release of the August 29 guidance and the banking regulation guidelines, the 280E IRS Code quite possibly no longer applies to cannabis.

In this current battle, which once again pits California and federal laws against one another, these recent developments at the federal level may play a major role. The roll out of new guidelines for financial institutes concerning the legal sales of marijuana laid out by the Department of Justice, appears to protect cannabis providers from 280E, making this case a potential game changer for the industry.

Outside of the courtroom, attorney William McPike projects this message and other expert advice via seminar sessions in conjunction with the advocacy institute 420 College. After an upcoming 420 College event on April 19th in Los Angeles, he is due to make an appearance in Canna Care’s hometown of Sacramento on May 31st, with the goal of educating cannabis entrepreneurs on avoiding such snares in the system (more info available at 420college.org).

Cases like this prove just how rapid the laws and regulations surrounding medical marijuana change. 2014 is gearing up to be a big year, and hopefully one that provides some clear-cut stability for advocates and the industry.

About 420 College
420 College is a California based collaboration of attorneys and experts, with the goal to provide all-inclusive instructional seminars to guide entrepreneurs of all level through the maze of medical marijuana regulations and requirements.

Media Contact :

P.O. Box 13698 Fresno, Ca 93755
420 College
George Grimes, president