Tag: legalized marijuana

Marijuana Companies Are Blocked From COVID-Era Employee Retention Tax Credits Under 280E Penalty, Federal Court Says

In yet another wrinkle stemming from the ongoing federal prohibition on marijuana, a U.S. district court has ruled that an Internal Revenue Service (IRS) tax rule prevents state-legal cannabis companies from being eligible for refunds of employee retention credits (ERCs), which helped businesses continue to pay workers during early COVID-era shutdowns.

In the decision, the U.S. District Court for the Western District of Washington ruled that “nothing in the plain text of [IRS code] Section 280E limits its application to income tax credits,” rejecting arguments from plaintiffs.

The government, meanwhile, contended that the Section 280E prohibits any and all tax credits, including refunds of the COVID-era ERCs, which are typically refundable for other businesses.

On May 9, the court granted the government’s motion to dismiss the the case, Solstice Holdings v. U.S.

Section 280E disallows standard tax deductions and tax credits for businesses that traffic in Schedule I or II substances. It applies even in cases where businesses are operating in compliance with state law.

The law firm Holland & Hart said in a post about the new ruling that it appears to be “the first case where a court has addressed the application of IRC § 280E to ERC.”

Another law firm, GreenspoonMarder, noted in post about the district court opinion that many cannabis businesses applied for the ERC during the pandemic—and many received it.

“Some were deemed ‘essential’ and had to stay open during the pandemic despite the higher costs associated with continued operations during the pandemic and various restrictions that rendered it much more difficult to visit their stores,” attorneys Nick Richards and Sabrina Strand wrote recently.

“When the ERC first came out, there was a question as to whether it was available to cannabis companies because it creates a tax credit that Section 280E may disallow,” the post points out. “There was also an argument that it didn’t apply to the ERC, because Section 280E is part of Section A of the [Internal Revenue Code], which concerns income rather than employment taxes. At least one court now disagrees.”

Both law firms suggest the case out of Washington State creates a standard across all states within the jurisdiction of the U.S. Court of Appeals for the Ninth Circuit. GreenspoonMarder, for example, says the ruling “technically only applies to companies located in the 9th Circuit.”

“That said, as the only opinion on this subject,” lawyers wrote, “the IRS may look to it as authority regardless of whether taxpayers are in one of the nine states located in the Circuit.”

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Missouri Officials Will Begin Unannounced Marijuana Dispensary Visits For New Product Testing Initiative Next Month

State cannabis regulators will begin their first attempt next month to double check the work of licensed testing labs tasked with ensuring the safety of Missouri marijuana products.

Starting July 1, staff with the Division of Cannabis Regulation will arrive unannounced at dispensaries and collect about 50 products a month off the shelves. They’ll take them to the Missouri State Public Health Reference Laboratory to be tested for things like mold, pesticides and a whole range of other things.

Ryan Bernard, the division’s testing and research unit manager, said the unannounced sampling has been in the works for a while as a way to add an extra level of compliance. The division, Bernard said, isn’t expecting to find problems.

“We won’t know until we see the data,” Bernard said. “I have full faith and confidence in our testing licensees that they’re testing according to rule as it’s been outlined.”

However, national testing lab experts told The Independent that Missouri’s regulators might be shocked at the results.

“Shelf testing has not gone well in any state that I know of, especially if it’s just starting,” said Josh Swider, vice chair of the cannabis working group for American Council of Independent Laboratories. “It will be very telling very fast.”

Swider pointed to a citation in Arizona in April of a cannabis lab, where the state found more than a dozen alleged “deficiencies” including problems with the lab’s potency testing and pesticide and microbial detection methods.

Swider called the levels of pesticides on the Arizona products “sickening.”

“But this is what you’re seeing around the country,” said Swider, co-founder and CEO of Infinite Chemical Analysis Labs in San Diego. “Regulators are starting to enforce. They’re realizing an issue that’s been systemic for a long time.”

Other common issue Missouri regulars might also find, he said, are inflated levels of THC on products.

Regulators previously talked about conducting a “round robin” testing, where the state’s certified testing labs would double check each other’s work under the state’s instruction. Amy Moore, director of the Division of Cannabis Regulation (DCR), told lawmakers in 2023 that this additional testing rule was “critical.”

“The challenges in regulating and relying on for-profit cannabis testing labs,” Moore told lawmakers at a 2023 committee hearing, “is one of the most discussed challenges in the national cannabis regulatory community.”

However, the state never ended up getting the process going for a variety of factors, Bernard said, so the unannounced samples will be the regulators first attempt at a testing backstop.

Lawmakers began allocating money for this kind of sampling to be tested at the state laboratory in the fiscal year that began on July 1, 2024 with $3.8 million. Most of it went unspent because the cannabis testing methods were “still in the process of being implemented,” according to state budget documents. Another $2.4 million was allocated for this fiscal year ending on June 30, and it’s unclear how much of it has been spent.

Bernard couldn’t speak on the budget for testing, he said, because the division and state lab budgets are “totally separate.”

“Our operating budget is DCR only,” he said. “State public health labs is theirs.”

The lab will receive another $2.4 million for the fiscal year beginning July 1.

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Trump Wants To Delete State Medical Marijuana Protections From Budget While Continuing To Block Cannabis Sales Legalization In D.C.

President Donald Trump is again proposing to remove existing protections for states that have legalized medical marijuana, while maintaining a ban that’s prevented Washington, D.C. from enacting a system of regulated adult-use cannabis sales.

As part of his budget request for the 2026 fiscal year sent to Congress on Friday, Trump is seeking to delete a longstanding rider that’s barred the Justice Department from using its funds to interfere in the implementation of state-level medical marijuana laws.

This is Trump’s first budget request of his second term, but during his first term he similarly called for its deletion each year of his presidency.

President Joe Biden, on the other hand, consistently proposed to continue the medical cannabis provision intact in his budget requests—though President Barack Obama, like Trump, had sought to delete it.

Congress has the final say on appropriations legislation language, however, and has not followed through on any president’s request to delete the medical marijuana protection since it was first enacted into law in 2014—though lawmakers have also declined to expand the protections to cover state recreational marijuana programs.

After signing prior appropriations bills into law that included the medical cannabis protection in contravention of his request to delete it, Trump on three occasions issued statements that specifically said his administration “will treat this provision consistent with the President’s constitutional responsibility to faithfully execute the laws of the United States”— implying he was reserving his right to ignore the rider.

The latest action in Trump’s new budget request will likely come as a disappointment to advocates and stakeholders, who have held out hope that the president would take a new direction on marijuana policy reform—especially after he endorsed rescheduling, industry banking access and a Florida cannabis legalization ballot initiative that ultimately fell short.

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New Jersey Lawmakers Consider Recriminalizing Some Marijuana Purchases And Sales

Lawmakers mulled Thursday whether New Jersey should ramp up enforcement against unlicensed cannabis sellers by passing a bill that would criminalize the purchase of unlicensed marijuana.

The bill riled cannabis activists, who say it would bring back the criminalization of weed that New Jersey’s marijuana legalization law was supposed to end. 

Under the bill, sponsored by Senate President Nick Scutari (D-Union), it would be a third-degree crime to operate an unlicensed marijuana business and a disorderly persons offense to knowingly purchase from one. A person who leads an “illegal marijuana business network” would be charged with a second-degree crime. 

“We have a problem where people are opening up brick-and-mortar stores, small stores, unlicensed to sell these products, and quite frankly, they’re just selling them and this state is doing nothing about it,” Scutari told the Senate Judiciary Committee Thursday. “We need to do something more about those brick-and-mortar stores, but we also need to continue to fight back against drug dealers because those are alive and well.” 

Scutari spearheaded legalizing recreational cannabis, first introducing legislation to regulate it for adult use in 2014. After bills languished in the Legislature, recreational cannabis was legalized in 2020 by voters, and Scutari was the primary sponsor of the bill to launch the legal marijuana industry.

Scutari said the new legislation would be a corrective measure in response to the “black and gray market” that has flourished even though hundreds of cannabis dispensaries have opened statewide.

New Jersey has some of the most expensive cannabis in the nation for both medical and recreational users. The industry has raked in over $1 billion since sales launched in April 2022. 

The committee did not vote on the bill, which does not yet have a companion in the Assembly.

Lawmakers generally voiced support for Scutari’s proposal to address the unlicensed THC products that they say undermine the regulated industry. Sen. Joe Lagana (D-Bergen) said he’s seen questionable cannabis products in “every single gas station I walk into, every convenience store, every corner store.”

But senators also repeatedly placed blame on the Attorney General’s Office, accusing it of not enforcing the state’s cannabis laws.

Sen. Mike Testa (R) blasted Attorney General Matt Platkin (D) for what he called “absentee” leadership. And Sen. Jon Bramnick (R-Union) said that once certain laws aren’t enforced, the community “loses respect for government.” Bramnick suggested the committee should call on Platkin to appear before them on the issue and said ignoring the law is “disrespectful to this body.”

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States Have Generated Nearly $25 Billion In Marijuana Tax Revenue Since First Markets Opened, New Report Finds

States have generated nearly $25 billion in revenue from recreational cannabis since the first sales started over a decade ago, according to a new report from a leading advocacy group.

The Marijuana Policy Project (MPP) also said that in 2024 alone, states collected $4.4 billion in recreational cannabis tax revenue—the most ever garnered in a single year. Seven states took in over $200 million each, with four of those seeing more than $500 million in revenue and one exceeding $1 billion.

“At a time when federal funding cuts are putting pressure on states’ budgets, adult-use cannabis taxes are bringing billions of dollars into states’ coffers,” Lauren Daly, interim executive director at MPP, said in a press release.

“Legal adult-use markets have also contributed to significant job growth, creating thousands of new employment and small business opportunities,” she said. “While economic growth isn’t the primary reason for legalizing adult-use cannabis, it is undeniably a great benefit.”

The new adult-use-focused analysis does not account for additional revenue that states have collected from medical marijuana sales.

MPP has been consistently tracking state cannabis tax data, and this latest report shows that states generated about $200 million more in 2024 compared to 2023.

“Cannabis prohibition destroys lives by tearing apart families and creating life-altering criminal records that stand in the way of jobs, housing, and an education,” Karen O’Keefe, director of state policies at MPP, said. “Cannabis legalization dramatically reduces the number of arrests and wasted law enforcement resources, while generating billions of dollars in new revenue that can improve residents’ wellbeing.”

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Ohio Is More Than Doubling The Amount Of Marijuana That Adults Can Legally Buy Per Day

Ohio adults will soon be able to buy more than double the amount of marijuana that they are currently allowed to purchase per day, with state officials determining that the market can sustainably supply both medical cannabis patients and adult consumers.

In a notice released last week, the Ohio Division of Cannabis Control (DCC) said that its priority “continues to be ensuring medical marijuana patients have adequate supply and maintain their medical marijuana card, and the Division knows that licensees share that priority.”

“Since non-medical cannabis sales began in August 2024, the market has demonstrated the ability to support both medical marijuana patients and non-medical consumers alike,” it said.

Accordingly, DCC said that, effective June 4, adults will be able to buy up to 2.5 ounces of flower cannabis per day, a significant increase compared to the current daily transaction limit of one ounce. This will make it so consumers could buy marijuana in an amount that matches the 2.5 ounce possession limit under state statute.

“At this time, when calculating 2.5 ounces of plant material, the only approved form that may be applied to the 2.5 ounces of cannabis plant material is dried cannabis plant material for vaporization,” the new notice says. “All other products apply towards the non-medical consumer’s cannabis product limitation of 15,000mg of total THC content.”

“Dispensaries are permitted to dispense in accordance with the statutory per day transaction limits but are not required to,” DCC said. “The Division reminds dispensaries of their responsibility…to serve and accommodate medical patients/caregivers and non-medical consumers alike, and maintain ongoing inventory sufficient to maintain an adequate supply of medical marijuana.”

The purchase limit for medical cannabis patients will not change under the updated guidance. Patients and caregivers can continue to buy up to a 90-day supply of marijuana for medical purposes.

If a retailer decides to raise its daily transaction limit for adult consumers in accordance with the guidance, the licensee must first submit a “Change of Operation” request to DCC.

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If California’s Marijuana Tax Hike Takes Effect Next Month, Consumers And Businesses Will Suffer—But There’s A Solution

A critical inflection point threatening the world’s largest legal cannabis market currently looms over California’s industry: A scheduled excise tax raise from the current rate of 15 percent to an unprecedented rate of 19 percent is set to take effect on July 1.

When California voters approved adult-use cannabis in 2016, they envisioned a thriving—and equitable—regulated industry. Unfortunately, the reality is that licensed operators are being strangled by regulations that push consumers straight to the illicit market. And despite the legal market generating approximately $7 billion in tax revenue since 2018, this hike would be a devastating blow.

The Reality of California’s Cannabis Market

On the ground in California, the illicit market continues to dominate cannabis sales. According to recent data from the Department of Cannabis Control (DCC), approximately 63 percent of the 3.8 million pounds of cannabis consumed by Californians in 2024 came from unlicensed production—unsurprising when considering the price differential consumers face.

When a consumer purchases cannabis from a licensed retailer, they’re not just paying for the product. They’re paying layers of taxes that can increase the final price by nearly 44 percent in some jurisdictions.

The California Department of Tax and Fee Administration’s (CDTFA) own example shows how a $35 purchase quickly balloons to over $50 due to combined taxes—and that’s before this tax increase. With the planned hike, that same purchase would approach $60.

Not only will consumers feel this increase in each purchase, many small businesses—particularly social equity operators and independent retailers already operating on razor-thin margins—simply won’t survive another tax increase of this magnitude.

Meanwhile, states like Michigan and Missouri are demonstrating steady sales growth thanks to lower taxes and fewer barriers to entry, and they are already exceeding the average per capita cannabis sales of California.

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Minnesota Tribe Opens State’s First Recreational Marijuana Store Off Reservation Lands, As Cities Plan Government-Run Dispensaries

A Native American tribe over the weekend opened Minnesota’s first-ever legal recreational marijuana store outside of a reservation. The new shop, in Moorhead, will be followed next month by another location in St. Cloud that will also be operated by the White Earth Nation.

Meanwhile, as Minnesota’s adult-use cannabis market gets up and running, more than a dozen cities and counties are seeking to open their own, government-run stores.

“This has never been done before, being the first to be able to open an off-reservation dispensary, let alone just the first dispensary in the state,” Zach Wilson, CEO of White Earth Nation’s cannabis business, Waabigwan Mashkiki, told Minnesota Public Radio (MPR) about the Moorhead store.

The launch of the new shop comes after Gov. Tim Walz (DFL) signed of a landmark agreement earlier this month to allow the tribe to operate up to eight retail marijuana stores across the state.

Everything the store sells “is all completely vertical, seed to sale,” with products grown, processed and packaged by Waabigwan Mashkiki—which means flower medicine in Ojibway—Wilson said. “The only thing we don’t manufacture is our beverages, but everything else absolutely, completely in house.”

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Congressional Bill Aimed At Protecting Kids Online Could Cause Headaches For Marijuana Businesses

A newly filed bill in Congress aimed at protecting children online could create headaches for advertisers trying to promote legal marijuana and other regulated substances.

Titled the Kids Online Safety Act (KOSA), the bipartisan proposal—from Sens. Marsha Blackburn (R-TN) and Richard Blumenthal (D-CT) as well as Senate Majority Leader John Thune (R-SD) and Senate Minority Leader Chuck Schumer (D-NY)—would create a “duty of care” for online platforms such as social media and streaming video services, requiring them to take steps to prevent access to potentially sensitive content by minors.

That includes advertisements for cannabis products and certain other drugs and services.

A factsheet from Blackburn’s office says the duty of care “requires social media companies to prevent and mitigate certain harms that they know their platforms and products are causing to young users.”

The sponsors say the legislation is necessary to protect children from pernicious practices that keep “kids glued to their screens” for hours a day, alleging that “Big Tech is trying every method possible to keep them scrolling, clicking ads, and sharing every detail of their life.”

The 63-page bill “targets the harms that online platforms cause through their own product and business decisions,” the factsheet says, “like how they design their products and applications to keep kids online for as long as possible, train their algorithms to exploit vulnerabilities, and target children with advertising.”

Much of the proposal is aimed at limiting content that fuels behavioral health disorders. Platforms would need to “exercise reasonable care in the creation and implementation of any design feature to prevent and mitigate the following harms to minors,” it says, listing eating and drug use disorders, suicidal ideation, violence and harassment, sexual exploitation, financial harm and others.

As for controlled substances, online platforms would be prohibited from facilitating the “advertising of narcotic drugs, cannabis products, tobacco products, gambling, or alcohol to an individual that the covered platform knows is a minor.”

The provision around drug use lists the “distribution, sale, or use of narcotic drugs, tobacco products, cannabis products, gambling, or alcohol” as risks that platforms would need to actively guard minors against.

Video streaming platforms meanwhile, would be required “to employ measures that safeguard against serving advertising for narcotic drugs, cannabis products, tobacco products, gambling, or alcohol directly to the account or profile of an individual that the service knows is a minor.”

“Big Tech platforms have shown time and time again they will always prioritize their bottom line over the safety of our children, and I’ve heard too many heartbreaking stories to count from parents who have lost a child because these companies have refused to make their platforms safer by default,” Blackburn said in a press release about the legislation.

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New York Marijuana Officials Launch Interactive ‘Buy Legal’ Map To Help Consumers Find Licensed Dispensaries

New York officials have launched a new online map that’s meant to help adults locate licensed marijuana retailers—one of their latest efforts to encourage consumers to buy their cannabis from the regulated market.

After a rocky rollout of the state’s legalization law opened the door to a proliferation of illicit marijuana shops, the governor and Office of Cannabis Management (OCM) have prioritized educating the public about the need to purchase their products from licensed dispensaries as a health and safety imperative.

To that end, Gov. Kathy Hochul (D) started a “Buy Legal” campaign in 2023. And the latest iteration of that campaign is a “new, consumer-friendly tool that helps New Yorkers locate licensed, open dispensaries across the state,” OCM announced on Wednesday.

“Whether you’re looking for adult-use or medical cannabis, delivery services, or equity-owned businesses, the Buy Legal map makes it easier than ever to shop safer, legal, and local,” it said, adding that people can “search by location, name, or filters like delivery” and also view “operating hours, website links, and real-time directions.”

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