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California medical marijuana dispensary plans to take IRS to court

Category: News | Posted on Mon, March, 21st 2011 by THCFinder
The IRS is thought to have begun audits on at least 12 medical marijuana dispensaries in California under the determination that past business deductions are invalid because of a clause in the federal tax code prohibiting any business that traffics in Schedule I or II drugs from making business deductions on their tax returns. The move could bankrupt every dispensary that it targets. The first dispensary to receive a final audit decision from the IRS is the Marin Alliance for Medical Marijuana (MAMM) in Fairfax, Calif.
 
Lynette Shaw, founder and owner of MAMM, is hoping to strike back before the IRS can deliver any more “final determinations” to other dispensaries currently being audited. Shaw intends to file an appeal in U.S. Tax Court within the month. There is actually a precedent for just such a case, when in 2007, a San Francisco dispensary primarily catering to terminal AIDS patients got its payment cut down to just over 1 percent of what the IRS originally said it owed in back taxes.
 
Shaw, however, seems to almost hope that a tax judge rules against her. A successful appeal of such a ruling would guarantee that neither MAMM nor any other dispensary in California or any other state would have to worry about future IRS audits. The next step would be the Ninth Circuit Court of Appeals, and Shaw is prepared to take the case to the Supreme Court if necessary.
 
Shaw says she hopes to do more than just override the tax code. She calls the IRS applying regulations meant for illicit drugs to something considered medication by state governments “an abrogation of states’ rights.” But she also intends to challenge the very classification of marijuana that has allowed the IRS to go after MAMM and other dispensaries.
 
“The Constitution says that all American laws shall be based upon a rational basis,” she says. “I’ve got a truckload of evidence to argue that this doesn’t pass the muster of rational basis.”
 

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Spokane WA: Medical marijuana dispenser convicted

Category: News | Posted on Fri, March, 18th 2011 by THCFinder
A Spokane jury rejected arguments Thursday that the state’s medical marijuana law allows for commercial dispensaries, convicting a supplier of multiple drug trafficking charges.
 
Scott Q. Shupe, who co-owned one of the first marijuana dispensaries in Spokane, argued the state’s medical marijuana law enables dispensaries to supply card-carrying patients, provided they serve just one patient at a time.
 
Prosecutors disputed that interpretation, arguing that the medical marijuana law, approved overwhelmingly by voters in 1998, makes no provisions for commercial dispensaries.
 
The case was being watched closely by authorities and dispensary operators alike, with both sides hoping that the jury would provide guidance for what many argue is a confusing state law.
 
In Spokane, Mayor Mary Verner said earlier this week that she supports medicinal use of marijuana, but she’s concerned about the rapid increase of dispensaries in Spokane neighborhoods. “I don’t want to have our community allow the cover of being in business for medical care to be really just a way to just dispense pot that otherwise would be illegal,” Verner said.
 
Defense attorney Frank Cikutovich said his client routinely kicked out patrons who tried to buy pot without proper authorization. He indicated the case will be appealed in an effort to clarify the language of the law.
 
“Their fate lies with the prosecutor’s decision whether or not to shut them down,” he said, referring to other dispensaries. “They want to be legitimate and give medicine to those who need it.”
 

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LAKE ELSINORE: Search warrants served at pot collective

Category: News | Posted on Thu, March, 17th 2011 by THCFinder
Three people were arrested and marijuana, hashish and money seized when search warrants were served at four houses and a Lake Elsinore medical marijuana collective involved in a year-long dispute with the city.
 
Riverside County sheriff's deputies and code enforcement officials served the warrants Tuesday at 420 Hitters on Casino Drive, two homes in Lake Elsinore and at homes in Hemet and Murrieta, sheriff's officials said.
 
Deputies confiscated 8 pounds of marijuana, 2.5 ounces of hash, 378 marijuana plants and $1,900.
 
Arrested were Dominic Armato, 31, collective manager; Melanie Birchard, 27, a receptionist; and Carol Stahl, 54, an edible-marijuana cook, deputies said. They were taken into custody on allegations that include conspiracy to possess, transport and sell marijuana and the cultivation of marijuana for sale.
 
Collective operators Luis Stahl and his son, Eric, face similar allegations when they are located, deputies said. The collective was closed Wednesday afternoon.
 
Carol Stahl is Luis Stahl's wife.
 
The raids followed a four-month investigation that authorities said shows the collective is operating outside the state's medical marijuana laws because it making a profit.
 
Luis Stahl, who goes by his middle name Carlos, denied Wednesday that the collective is operating illegally.
 
"They thought they would come out and find a bunch of illegal stuff," Carlos Stahl said in a phone interview. "They didn't find one single thing we're doing that's illegal."
 
Carlos Stahl questioned how investigators determined the collective is making a profit, saying he does not believe they looked at the bookkeeping records.
 
"It's a collective, not a business," Carlos Stahl said. "The only thing we can charge for is reimbursement of our direct expenses. I have no idea why they said we're making a profit."
 
The collective has operated recently in at least three storefronts in Lake Elsinore under the names 420 Hitters on Casino Drive and R Side Medical on Auto Center Drive. The operation moved briefly to another location before opening on Casino Drive.
 

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IRS goes after medical marijuana in California

Category: News | Posted on Thu, March, 17th 2011 by THCFinder
Federal agencies have stepped up efforts to crack down on medical marijuana, and while high-profile ATF raids may be more immediately shocking, there is a less direct tactic being used that could spell the death of medical marijuana across the country, according to its opponents.
 
In the last several months, the IRS has begun targeting medical marijuana dispensaries in California, declaring that some owe millions in back taxes as a result of a section of U.S. tax code that the IRS is now applying to medical marijuana dispensaries.
 
This isn’t the first time the IRS has attempted to use this clause to go after medical marijuana dispensaries. In 2007, the agency assessed that San Francisco-based dispensary Californians Helping to Alleviate Medical Problems (CHAMP) owed nearly half a million dollars in back taxes. The IRS argued at the time that Section 280E of the U.S. Tax Code, created in the early ‘80s to prevent drug dealers from writing off “business” expenses, meant that because CHAMP’s business was built on a drug that is illegal under federal law, the business deductions it made that year were invalid. CHARM took its case to U.S. Tax Court and won, cutting its payments from $426,000 to $4,905.
 
So if there’s already a court precedent for the IRS losing a case just like this, why are they suddenly, vigorously pursuing it again? That’s not entirely clear — and the IRS refuses to comment on any audits it undertakes. And yet, Steve Fox, lobbyist for theNational Cannabis Industry Association (NCIA), says that he’s heard that up to a dozen dispensaries throughout California have been put through the audit process (and there could be untold dozens more who haven’t made it known outside of their organizations). Just three have gone public with their audits: the Harborside Health Center in Oakland,The Farmacy in Los Angeles and the much smaller Marin Alliance for Medical Marijuana (MAMM) in the northern town of Fairfax, which has the distinction of being the longest-standing licensed medical marijuana dispensary in the country, according to founder and director Lynette Shaw.
 
Shaw says that her dispensary is also the first in the country to be handed a “final determination” demanding back taxes from the IRS. The final determination, handed down earlier this month, rules that MAMM owes nearly $800,000 from 2009 alone because its businesses deductions are now considered invalid. Shaw has been filing tax returns with business deductions since MAMM’s foundation in 1997, but this is the first year that the IRS has taken issue with them. If the IRS goes back and audits MAMM’s books dating back to ’97, the dispensary would owe millions — millions Shaw says neither she nor her organization has.
 
Shaw believes that the end goal in all this is to hit her and other dispensary owners with astronomical back taxes that they will be unable to pay, a situation that would inevitably shutter every dispensary that gets audited. The Obama administration had issued a Justice Department directive in 2009 to not take action against medical marijuana dispensaries, and while Shaw has faith that the administration itself remains committed to honoring that plan, she’s convinced that “the DEA is using the IRS to get rid of us while Obama’s busy.” She thinks that the federal government may have targeted her first because of her involvement in a 1998 civil suit in which she and five other dispensary owners went up against President Clinton’s Department of Justice, which sought to stop them from distributing marijuana. The case was never given a final decision and finally died in court after the statute of limitations lapsed.
 

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THC DUI bill moves forward, passing out of committee

Category: News | Posted on Fri, March, 11th 2011 by THCFinder
Medical Marijuana patients and recreational users of the drug filled the Old Supreme Court chambers of the Capitol Thursday as they emotionally testified against a bill to make driving while high a DUI per se. Targeting what they said were faulty or old studies, medical marijuana users failed to convince the House Judiciary Committee that marijuana did not pose a risk to themselves and others while they drove. The vote passed 6-3 with many members absent.
 
As introduced, HB 1261 makes driving with a blood content of 5 nanograms of THC or more a misdemeanor and creates the presumption that the person is driving under the influence of drugs as a result. The offense would essentially be treated the same as a DUI for alcohol.
 
“Some folks say that we are going to prevent legitimate medical marijuana users from exercising their right to drive,” bill cosponsor Mark Waller, R-Colorado Springs, said. “Well it is currently against the law to drive under the influence of marijuana just like it is any drug.”
 
Many of those testifying against the bill called into question the 5 nanogram per se limit and called for an 8 nanogram limit if there was to be a limit at all. They said that many long-term medical marijuana users have developed a tolerance that allows them to perform better than occasional users.
 
A number of experts testified to the effect that while a person may think they are not affected their body is not performing up to speed. They said one test that is done, for example, is to see if someone can cross their eyes–an action that those too heavily under the influence cannot perform.
 
Waller said the presumption of impairment can be rebutted, while Boulder Democrat Claire Levy said simply the bill was necessary to protect public safety.
 
“Whether you are a marijuana patient or not, it is a bill about public safety,” co-sponsor Levy said. “There are studies to support this result. Law enforcement, I think will behave responsibly in having probable cause to stop and to require a blood test and I think it is just a matter of common sense.
 

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Naval Academy expels 3 more over synthetic pot

Category: News | Posted on Thu, March, 10th 2011 by THCFinder
ANNAPOLIS, Md. -- The U.S. Naval Academy says three more midshipmen have been expelled for using or possessing synthetic marijuana, bringing the total number of dismissals to 11 so far this year.
 
That's the same number of total expulsions for drug policy violations in each of the last two calendar years.
 
Synthetic marijuana can be purchased legally but is banned by the Defense Department and the Navy. The Naval Criminal Investigative Service is leading an investigation at the academy.
 
The academy has been trying to raise awareness about a growing trend of fake marijuana use. The superintendent and commandant have addressed the issue at school-wide forums. The academy says it also has increased computer monitoring of common synthetic drug websites.
 

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