Seventeen states and the District of Columbia have passed laws legalizing medical marijuana, but the feds aren’t having it. Since 2008, the U.S. government has aggressively pursued marijuana dispensaries in those areas, trying to shut them down. Their most effective tactic has been for the Internal Revenue Service to take the businesses to tax court.
Federal tax code states that businesses trafficking in controlled substances cannot claim tax deductions for business expenses. While medical marijuana may be legal in many states, the federal government still defines it as a controlled substance, applicable throughout the country. The view of the IRS on deductions was just upheld unanimously by the judges of Washington D.C.’s U.S. Tax Court, through their ruling in Olive v. Commissioner. The ruling means that dispensaries will face massive bills for back taxes and penalties.
“Every dispensary in the nation, past, present and future is dead if this is upheld,” says Lynette Shaw, owner of the Martin Alliance dispensary. Her California business was one of the first to be shut down by the government.
But hold on. Not so fast. Another case is wending its way through the courts that may turn the issue on its head. Americans for Safe Access sued the federal government over its classification of marijuana, which labels the drug as dangerous with no medical value. At the end of July, the United States Court of Appeals for the D.C. Circuit agreed to hear oral arguments in the lawsuit.
Ten years into the debate, the therapeutic value of marijuana will finally get its day in court, with the possibility that the federal government will be forced to change its classification. The hearing, complete with all available scientific evidence, will take place on October 16th.
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