Coporate Americas High Life
Stacking the vapors... ILLA
Forbs.com
It’s hard to ignore the prevalence of medical marijuana dispensaries in California and elsewhere. They are on the corner and in the news. If you are a tax lawyer, it is even harder to ignore them, for there are big tax problems in this industry. See Voters Say Yes To Marijuana, IRS Says No. But when I said I thought the industry was going corporate—Is Medical Marijuana Going Corporate?—I didn’t realize how true it was.
Now I’m getting merger notices. Yes, marijuana M&A is here. In this case, it’s about the vapor machines that can obviate smoking and instead dispense the meds without even using a match (or a lighter for that matter).
Medbox, Inc. (OTC Markets: MDBX) announced the acquisition of 100% of Vaporfection International Inc., manufacturer of Vaporfection vaporizers. Medbox was featured on the cover of the Los Angeles Times Business Section: Wall Street sees opportunity in marijuana.
Vaporfection makes “herbal delivery systems.” The deal involved the issuance of 260,864 MDBX stock warrants. Medbox sells and services automated, biometrically controlled dispensing and storage systems for medicine and merchandise. And Vaporfection seems quite a catch.
Vaporfection claimed Best Vaporizer in Product of the Year at the Cannabis Cup Amsterdam 2011, and Best Vaporizer at the Kush Expo LA 2012. The company’s patented designs cause marijuana to release its medicinal ingredient into the vapor. The resulting vapor is pure, virtually odorless, and goes into the patient’s respiratory system.
Vaporfection was created by Amir Yomtov in 2006. In 2011, the company was purchased by entrepreneur Herb Postma. Mr. Postma continues to manage Vaporfection and notes that under Medbox, Vaporfection revenues are projected to exceed $4 million in 12 months. All this sound rosy, but not to the feds.
After all, legal dispensaries are still labeled as drug traffickers under federal law, and that creates big tax problems. Section 280E of the tax code denies tax deductions for any business trafficking in controlled substances. The IRS says it must enforce Section 280E. Yet the U.S. Tax Court has opened the door a crack by allowing dispensaries to deduct other expenses distinct from dispensing marijuana. See Californians Helping to Alleviate Medical Problems Inc. v. Commissioner.
If a dispensary sells marijuana and operates the separate business of care-giving, the care-giving expenses are deductible. Some expenses might relate to both. If only 10% of the premises are used to dispense marijuana, 90% of the rent is deductible. But good record-keeping is essential. See Medical Marijuana Dispensaries Persist Despite Tax Obstacles.
But even good records won’t make vaporizers or drug paraphernalia deductible. In Olive v. Commissioner, Martin Olive sold medical marijuana at the Vapor Room, where he used vaporizers so patients didn’t have to smoke. However, with only one business, Section 280E precluded Olive’s deductions.
Robert W. Wood practices law with Wood LLP, in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.
Obama // Romney // Legalization?
Ads running to legalize marijuana in three states
RBR.com
By Carl Marcucci
In November, voters in Colorado, Washington and Oregon will consider legalizing marijuana for recreational use. Although similar initiatives have failed in the past, this time the groups fighting to legalize pot are well-organized, professional and backed by high-dollar donors willing to outspend the competition, reports Raycom News Network.
In Colorado, the Campaign to Regulate Marijuana Like Alcohol (CRMLA) has produced several ads that say marijuana is healthier than alcohol. The campaign’s website points to medical studies that claim marijuana, unlike alcohol, has not been linked to cancer, brain damage, addiction or high healthcare costs.
CRMLA was given nearly $1.2 million from the Marijuana Policy Project, a DC-based lobbying group, as well as more than $800,000 by Peter Lewis, the founder and chairman of Progressive Insurance. Lewis has been a vocal proponent of marijuana legalization for several years and donated millions to legalization efforts around the country.
In an online video ad campaign, CRMLA has young adults explaining to their parents they prefer marijuana to alcohol. In one of the ads, titled Dear Mom, a 20-something woman tells her mother marijuana is “better for my body, I don’t get hung-over and honestly I feel safer around marijuana users.”
In Washington, rather than comparing marijuana to alcohol, New Approach Washington (NAW) is focusing on legalization, arguing outlawing cannabis does more harm than good, by wasting tax dollars on law enforcement while letting gangs control the money. She describes the possible benefits of legalization through saved law enforcement dollars and extra tax revenue.
The TV spot has a professional/executive looking woman, “I don’t like it personally, but it’s time for a conversation about legalizing marijuana. It’s a multi-million dollar industry in Washington state, and we get no benefit.”
These efforts appear to be working. In Washington, 50% of voters say marijuana should be legal while 38% say it should not, according to an Elway Research poll. And in Colorado, a Denver Post poll showed 51% of Coloradans were in favor of legalization, while 41% opposed it.
In Washington, the effort to legalize marijuana is being fought with a bankroll of between $4 and $5 million, according to the Raycom News Network story. NAW used those funds to put $1 million into television advertising during August, and hope to put triple that amount into the weeks preceding the November vote.
In total, groups in Colorado fighting to get marijuana legalized have a war chest of $2.5 million.
The campaigns are especially targeting women ages 30 to 55, whom tend to be less supportive of legalization and regulation than men.
The only visible group opposing the marijuana ballot, SMART Colorado, has been given less than $200,000 – most of it from Save Our Society, a Florida-based anti-drug group.
RBR-TVBR observation: Interesting that the Chairman of Progressive Insurance is donating so much money in this legalization effort. Perhaps legalizing it would create fewer accidents/injuries from police chases and save the insurance industry money? We doubt drivers with the stuff in their car would try to flee if it’s no more illegal than a pack of cigarettes. Who knows, but Progressive is a big corporation and Lewis seems to not be concerned about sticking his neck out on this.
Dirty judgement
Medical Marijuana Lawsuit Dismissed By Federal Judge In Sacramento
huffingtonpost.com
SAN FRANCISCO -- Medical marijuana advocates faced another setback Tuesday, when a federal judge in Sacramento dismissed a lawsuit claiming that the Obama administration broke its promise to leave the pot industry alone when it began an aggressive crackdown against California dispensaries last fall.
Proponents of the suit cited President Obama's 2009 Ogden Memo, which told federal prosecutors to concentrate their efforts on large drug trafficking networks and "not focus federal resources" on medical marijuana operations in states that have legalized cannabis for medicinal purposes.
But in a sharp reversal of the memo, federal authorities announced a renewed effort to target pot dispensaries throughout California last October, claiming the industry had ballooned to unprecedented proportions.
In the four months since the reinstated crackdown, a number of medical cannabis clubs across the state have been forced to shut down, including five in San Francisco and the legendary Marin Alliance for Medical Marijuana in Marin County, California's oldest. The District Attorney's office has begun investigating 12 more stores in San Francisco this year.
The U.S. attorneys going after such dispensaries have justified their actions mainly by claiming the shops operate too close to parks and schools.
Pot activists have fought back, arguing the federal government should focus its energy elsewhere and not interfere with states abiding by their own laws.
"It's a total waste of resources," Stephanie Tucker, spokeswoman for the San Francisco Medical Cannabis Task Force, told The Huffington Post. "They're attacking a peaceful, regulated community and it's wasting money. Shame on them."
The Sacramento lawsuit was one of a handful filed in November by cannabis suppliers and patients, who cited the Ogden Memo as the basis for their action. U.S. District Judge Garland Burrell, who reviewed the case in the capitol, justified his dismissal by claiming the memo was not a "binding commitment," simply a statement of priorities.
Burrell's ruling will allow for prosecutors to continue to take action against dispensaries operating throughout the state.
Matthew Kumin, a lawyer representing one of the dispensaries in the Sacramento case, told SF Weekly that the dismissal of the cases without allowing a fair trial is bogus. "The government's blocking of us is irrational at this point," Kumin said to SF Weekly. "It's clear there's medical use; circumstances have changed."
Kumin pointed to federally-backed clinical trials of cannabis-based drugs such as Sativex as proof that scientists believe marijuana has a medical benefit. Despite that, he said he expects similar lawsuits in Oakland and Los Angeles to be dismissed this week.
"The judges know we're in the right," he said. "They just don't want to admit it."
SAN FRANCISCO -- Medical marijuana advocates faced another setback Tuesday, when a federal judge in Sacramento dismissed a lawsuit claiming that the Obama administration broke its promise to leave the pot industry alone when it began an aggressive crackdown against California dispensaries last fall.
Proponents of the suit cited President Obama's 2009 Ogden Memo, which told federal prosecutors to concentrate their efforts on large drug trafficking networks and "not focus federal resources" on medical marijuana operations in states that have legalized cannabis for medicinal purposes.
But in a sharp reversal of the memo, federal authorities announced a renewed effort to target pot dispensaries throughout California last October, claiming the industry had ballooned to unprecedented proportions.
In the four months since the reinstated crackdown, a number of medical cannabis clubs across the state have been forced to shut down, including five in San Francisco and the legendary Marin Alliance for Medical Marijuana in Marin County, California's oldest. The District Attorney's office has begun investigating 12 more stores in San Francisco this year.
The U.S. attorneys going after such dispensaries have justified their actions mainly by claiming the shops operate too close to parks and schools.
Pot activists have fought back, arguing the federal government should focus its energy elsewhere and not interfere with states abiding by their own laws.
"It's a total waste of resources," Stephanie Tucker, spokeswoman for the San Francisco Medical Cannabis Task Force, told The Huffington Post. "They're attacking a peaceful, regulated community and it's wasting money. Shame on them."
The Sacramento lawsuit was one of a handful filed in November by cannabis suppliers and patients, who cited the Ogden Memo as the basis for their action. U.S. District Judge Garland Burrell, who reviewed the case in the capitol, justified his dismissal by claiming the memo was not a "binding commitment," simply a statement of priorities.
Burrell's ruling will allow for prosecutors to continue to take action against dispensaries operating throughout the state.
Matthew Kumin, a lawyer representing one of the dispensaries in the Sacramento case, told SF Weekly that the dismissal of the cases without allowing a fair trial is bogus. "The government's blocking of us is irrational at this point," Kumin said to SF Weekly. "It's clear there's medical use; circumstances have changed."
Kumin pointed to federally-backed clinical trials of cannabis-based drugs such as Sativex as proof that scientists believe marijuana has a medical benefit. Despite that, he said he expects similar lawsuits in Oakland and Los Angeles to be dismissed this week.
"The judges know we're in the right," he said. "They just don't want to admit it."
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No justice
Medical Marijuana Providers Can't Fend Off Federal Prosecution
By NICK MCCANN courthousenews.com
OAKLAND, Calif. (CN) - Three Bay Area medical marijuana dispensaries, a landlord and a patient can't stop the federal government from prosecuting them, a federal judge ruled. Citing federal laws and precedent, the judge said the plaintiffs face an "insurmountable challenge" in showing that patients will be harmed by the federal crackdown.
The Marin Alliance for Medical Marijuana, MediThrive and The Divinity Tree sought a temporary restraining order to prevent federal authorities from prosecuting marijuana growers and providers.
In a 27-page order on Monday, U.S. District Judge Saundra Brown Armstrong noted the "tension that exists between federal and California laws governing marijuana use."
The California Compassionate Use Act allows state residents to use medical marijuana, but the plant is a Schedule I controlled substance under federal law.
In September, U.S. attorneys in California announced their intention to shut down medical marijuana dispensaries and prosecute the businesses, their landlords and patients.
The plaintiffs received letters notifying them they were subject to "criminal prosecution, imprisonment, fines, and forfeiture of assets, including the real property on which the dispensary is operating" unless they shut down within 45 days.
In response, the plaintiffs sought a restraining order that would prevent the U.S. attorney for Northern California from prosecuting or seeking forfeitures from marijuana growers and providers.
They also sought a declaration that enforcement of the Controlled Substances Act unconstitutionally "prevents plaintiffs and similarly situated individuals from obtaining medical marijuana with a doctor's recommendation."
But Judge Armstrong said the plaintiffs were unlikely to prevail, based on the record from the 9th Circuit and the U.S. Supreme Court.
Citing the Supreme Court ruling in Gonzalez v. Raich, Armstrong noted that the "plaintiffs' purported fundamental right conspicuously omits any reference to 'marijuana.'
In Raich, the plaintiff claimed she had a "fundamental right" to "make life-shaping medical decisions that are necessary to preserve the integrity of her body, avoid intolerable physical pain, and preserve her life."
Judge Armstrong rejected this argument.
"Although the number of jurisdictions that have medical marijuana laws has increased by six, the fact remains that the majority of states do not recognize the right to use marijuana for medicinal purposes," Armstrong wrote.
"Moreover, as to those states that have not legalized medical marijuana, there is no allegation or evidence of a pattern of non-enforcement of laws proscribing its use. Finally - and significantly - it is difficult to reconcile the purported existence of a fundamental right to use marijuana for medical reasons with Congress' pronouncement that 'for purposes of the [CSA], marijuana has no currently accepted medical use at all.'" (Brackets in complaint.)
Because the Supreme Court has held that courts cannot consider the efficacy of medical marijuana as a basis to challenge enforcement of federal drug laws, Armstrong said the plaintiffs face an "insurmountable challenge.
Loose lips still sinking ships…
El Monte Marijuana Bust Uncovers $1 Million In Pot
Awful story. Bad karma to follow......smh.....-UA
huffingtonpost.com 6/5
When Los Angeles deputies responded to a burglary-in-progress call in El Monte, they had no idea they'd be stumbling across one of the biggest marijuana grow houses in the city's history.
On Saturday morning, four men and a teen boy were caught trying to break in to what seemed to be an abandoned warehouse on Continental Avenue. Instead of guns or other weapons, the thieves were armed with gloves and clippers, reports NBC LA. Their getaway car? A U-Haul.
Eventually, one of the suspects tipped authorities off about their intended target: over 3,000 marijuana plants valued at around $1 million. After obtaining a search warrant, El Monte police entered the warehouse to carry out what is being touted as "the biggest drug bust in El Monte history."
KTLA's look inside the El Monte warehouse plantation reveals a secret 3-foot high crawl space where a guard was stationed to watch the door through an air-conditioning vent. Inside, a sophisticated system of lighting and irrigation nurtured thousands of marijuana plants that were just three weeks away from harvest. Finally, the growers evaded detection by sourcing their electricity directly from underground wires, which authorities believe enabled them to steal $10,000 of electricity per month.
One of the robbery suspects alleges that the grow house belongs to his family, who was cutting him out of the profits. He had wrangled four friends to help him claim his share.
OMG this plant can yield money too?! WOW!
Pot Tax Nets City $290K
Someone wanna wake up the fed? The thought of healthy citizens doesn't excite them, maybe more of our money will. -UA
Posted by Josh Koehn on Monday, May 16, 2011 sanjoseinside.com
In its first month of collecting taxes on medical marijuana being sold inside city limits, San Jose took in almost $290,000. And it appears more money is still on the table.
The approval of Measure U by voters in last November’s election led to a 7 percent tax on all gross receipts for the city’s collectives. Less than three-quarters (73) of San Jose’s 100-plus collectives paid the business tax in March, according to city figures. Four collectives have already made payments totaling $20,000 for April.
With the City Council’s decision last month to cap medical marijuana collectives to 10, which could go into effect by September, it’s unclear how much money will be collected in future months as well as what costs will go into regulation. Measure U was billed by Mayor Chuck Reed and several councilmembers as a way to help the city increase revenue in the face of the city’s 10th straight year of a budget deficit.
Dave Hodges, who started the city’s first collective, San Jose Cannabis Buyers Collective, has said he is refusing to pay the tax on his new collective: All American Cannabis Club. Hodges claims the wording of Measure U would force him to break the law.
A failure to pay the tax results in a 25 percent increase of the amount due, plus interest on the unpaid tax.
On Friday, Reed called for the city to declare a fiscal and public safety emergency. City Manager Debra Figone’s office has said the city will be $115 million in the red for the upcoming fiscal year, which begins in July.
Click Here to Read the Medical Marijuana Tax Revenue Memo.
The following are key dates regarding regulation of San Jose’s medical marijuana collectives:
May 20 thru 27: Manager’s Budget Addendum (MBA) Released
June 8: Planning Commission hearing on Title 20, Land Use/Zoning Regulations
June 14: First reading of Title 20— Land Use/Zoning; Second reading Title 6—Regulations; City Council Consideration of MBA
June 21: Second Reading, Title 20
July TBD: Applications Made Available for Medical Marijuana Registration With Further Instructions on Process
July 14: Title 6 Effective Date
July 21: Title 20 Effective Date
July – August: Application Process Implemented
September GOAL: Select 10 Collectives and Process Registration with the City
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