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A Key Senate Committee Is Becoming Less Marijuana-Friendly

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For the past several years, the U.S. Senate Appropriations Committee has been more responsible for marijuana reform victories in Congress than any other panel of lawmakers.

Bipartisan measures to protect state medical cannabis laws, allow medical marijuana for military veterans and shield state industrial hemp research programs from the feds have all advanced there.

Those wins have been especially valuable for legalization supporters because in the other chamber, the House Rules Committee has blocked cannabis-related amendments from advancing to the floor over the same period of time.

But in recent weeks the Senate committee, which handles funding levels and spending riders covering federal agencies, has begun to make a number of anti-cannabis moves.

Last week, for example, it prevented a measure to allow marijuana businesses to access banks from advancing by a vote of 21-10. Nearly identical amendments were approved by the committee in 2015 and 2016, but this time several Democrats who position themselves as supporters of cannabis law reform spoke out against the proposal on procedural grounds.

Earlier this month the panel released a report incorrectly alleging an increase in impaired driving in states that have reformed their cannabis laws.

In a separate report this month the committee expressed concern about illegal marijuana cultivation on public lands, singling out states with legalization.

And now, in a new development that hasn’t yet been reported elsewhere, the committee is making moves to block Washington, D.C. from further legalizing marijuana.

“No funds available for obligation or expenditure by the District of Columbia government under any authority may be used to enact any law, rule, or regulation to legalize or otherwise reduce penalties associated with the possession, use, or distribution of any schedule I substance under the Controlled Substances Act (21 U.S.C. 801 et seq.) or any tetrahydrocannabinols derivative for recreational purposes,” reads a provision of the Financial Services and General Government funding bill approved by the committee on Thursday.

Unlike the House Appropriations Committee, which has consistently moved to block cannabis reform in the nation’s capital, the Senate panel for the past several years has kept its version of funding bill free of marijuana-related D.C. riders (though the spending bans have been enacted into law anyway because the House language has prevailed in bicameral conference committees that reconcile both chambers’ bills into final legislation).

Now that the Senate committee has moved to adopt the D.C. cannabis prohibition as well, its continuance into Fiscal Year 2019 is a virtual certainty, meaning that local officials will not be able to spend locally raised funds adding a system of taxed and regulated marijuana sales to the city’s existing law that allows low-level possession and home cultivation.

“I am disappointed that the committee chose to depart from their past practice of not including anti-D.C. riders,” Congresswoman Eleanor Holmes Norton (D-DC) said in a press release. “I will be fighting here in the House and Senate to strike all anti-D.C. riders and prevent any new riders from being included in the final spending bill.”

Also, committee report attached to the new funding bill also goes out of its way to wag its finger at Indian tribes that might be considering entering the marijuana industry.

“The Committee expects the CDFI Fund to ensure no funding is allocated to tribes to support marijuana production, manufacturing, or distribution and report to the Committee on any Tribe who engages in such activities and receives funding appropriated by this act,” the report says, referring to the Community Development Financial Institutions Fund, which focuses on economic revitalization in distressed communities.

None of this is to say that the Senate panel has defeated all recent marijuana reform measures. For example, this month it opted to continue protecting states where medical marijuana is legal from federal interference and approved an amendment that would allow Department of Veterans Affairs (VA) doctors to issue medical cannabis recommendations to veterans. And last month, it directed the Department of Agriculture to set aside half a million dollars to build a hemp seedbank.

Significantly, the language protecting state medical cannabis laws was included in the initial Justice Department bill as introduced by Republican leaders for the first time, whereas its enactment in past years has required a specific votes on amendments to add it.

But, in other ways noted above, the committee has clearly become less friendly to marijuana law reform efforts in recent months, and one major factor is its new chairman.

Sen. Richard Shelby (R-AL) ascended to the top position on the panel in April, following the retirement of Sen. Thad Cochran (R-MS). While Cochran was not exactly a champion of cannabis legalization, he left advocates with the sense that he just didn’t care much about the issue by allowing amendments to be voted on without applying significant behind-the-scenes pressure.

Shelby, on the other hand, who for years served alongside U.S. Attorney General Jeff Sessions in representing Alabama in the Senate, has made it clear that he doesn’t like the idea of attaching policy riders — marijuana or otherwise — to spending bills.

“Chairman Shelby was very anti-amendments this year,” Michael Liszewski of the Enact Group, told Marijuana Moment. “If you watched this year’s hearings, you probably noticed a decrease in the number of amendments offered. That’s because Shelby made it clear that he had very little tolerance for legislating through approps.”

And, he appears to be making deals with Democrats to accomplish his goal of reducing the number of policy riders on appropriations legislation.

That’s the conclusion that can reasonably be drawn from an exchange between Shelby and Sen. Patrick Leahy (D-VT), who has been a champion of marijuana law reform efforts in the committee, that could be faintly heard on the committee’s audio feed just moments after the Vermont Democrat helped lead the charge to kill the cannabis banking measure last week:

SHELBY: “Thank you, Pat.”

LEAHY: “I told you I would.”

While Leahy said during a debate before the vote to table the measure that he objected to its advancement on procedural grounds concerning the alleged inappropriateness of legislating policy on spending bills, the fact is that Leahy himself is more responsible than any other senator for the continuance of the separate rider preventing Justice Department interference in state medical cannabis laws, so his public argument seems at least a little disingenuous.

Advocates who did not wish to be quoted for this story speculated that Democrats may have extracted some concessions on immigration policy in exchange for not pushing the marijuana banking rider, but that could not be immediately confirmed.

Another key change on the appropriations panel is the fact that Sen. James Lankford (R-OK), a vocal cannabis opponent, recently became chair of its Financial Services and General Government Subcommittee, which handles Washington, D.C.

His ascendancy to the subcommittee chairmanship likely explains the panel’s inclusion of anti-marijuana language in the relevant funding bill for the first time in years. (Of note, however, the Senate bill covering D.C. doesn’t contain language from the House version of the legislation that would add a new restriction on the use of funds to support opening safe consumption facilities where people could consume illegal drugs under the supervision of medical professionals.)

Justin Strekal of NORML told Marijuana Moment in an interview that the committee’s seeming shift away from support for marijuana law reform in recent weeks may, perhaps counterintuitively, have to do with cannabis legalization’s growing political support.

“We’ve gained more momentum,” he said, referring to the fact that numerous lawmakers — including party leaders like Sen. Chuck Schumer (D-NY) — are embracing legislation that would provide more permanent fixes to the federal-state cannabis law gap than annual appropriations riders can.

“The stark realities are much crisper now,” he said. “Every amendment that tinkers with [cannabis enforcement] is still dancing around the fact that we still live under a regime of complete prohibition.”

“It’s increasingly going to be more difficult to get lawmakers to be OK with cutesy little fixes when the need for comprehensive reform is crystalizing.”

But in order to enact broader solutions, it’s going to take movement by committees that set federal drug policy and enact authorizations for relevant federal agencies.

Unfortunately, those panels — the House and Senate Judiciary Committees — at least for now, are controlled by ardent legalization opponents. But with a midterm election coming up that observers believe could reverse party control of one or both chambers, anything can happen in 2019.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Tom Angell is the editor of Marijuana Moment. A 20-year veteran in the cannabis law reform movement, he covers the policy and politics of marijuana. Separately, he founded the nonprofit Marijuana Majority. Previously he reported for Marijuana.com and MassRoots, and handled media relations and campaigns for Law Enforcement Against Prohibition and Students for Sensible Drug Policy. (Organization citations are for identification only and do not constitute an endorsement or partnership.)

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IRS Official Offers Tax Advice To Marijuana Businesses And Says Feds Expect Industry To Keep Growing

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The Internal Revenue Service (IRS) says it expects the marijuana industry to continue to grow, and it’s offering some tips to cannabis businesses on staying compliant with taxes while the plant remains federally prohibited.

In a blog post on Monday, IRS’s De Lon Harris said that the “evolving and complex issue my organization has been focused on is the tax implications for the rapidly growing cannabis/marijuana industry.”

“The specific rules and regulations regarding how [marijuana] is taxed at the federal level provides the IRS an opportunity to promote voluntary compliance, not only through audits, but also through outreach and education,” he said, noting the rapid expansion of state-legal cannabis markets. “And while there are 14 states that still ban cannabis use, we expect both unlicensed and licensed marijuana businesses to grow.”

“It’s tricky from a business perspective, because even though states are legalizing marijuana and treating its sale as a legal business enterprise, it’s still considered a Schedule 1 controlled substance under federal law,” Harris wrote. “That means a cannabis/marijuana business has additional considerations under the law, creating unique challenges for members of the industry.”

The official, who serves as commissioner of IRS’s Small Business/Self Employed (SB/SE) Examination division, recognized that the status quo means that marijuana businesses are forced to operate on a largely cash-only basis, and federal prohibition also means that companies in the sector are precluded to taking key tax deductions.

However, while the tax statute known as 280E means the industry is ineligible for most federal tax deductions and credits, he noted that marijuana firms “can deduct their cost of goods sold, which is basically the cost of their inventory.”

“What isn’t deductible are the normal overhead expenses, such as advertising expenses, wages and salaries, and travel expenses, to name a few,” Harris said. “I understand this nuance can be a challenge for some business owners, and I also realize small businesses don’t always have a lot of resources available to them.

The official previewed a new “Cannabis/Marijuana Initiative” the agency is launching that will provide specific job training to tax officials to effectively carry out audits within the industry, ensure that there’s consistency in the IRS’s policy for cannabis, work with stakeholders to ensure tax compliance and help to identify non-compliant businesses.

“I’m very focused on the success of this strategy because it’s very important for business owners to understand that under our nation’s tax laws, and specifically Internal Revenue Code 61, all income is taxable, even if someone is running a business that’s considered illegal under federal law,” he said. “This is a truly groundbreaking effort for our agency.”

“Our strategy is not limited to pushing information out via our website in the hope that business owners will find it. I’ve made it a priority for my SB/SE organization to engage with the cannabis/marijuana industry through speaking events and other outreach. I have done three of these types of events over the last year, and what I have heard is a genuine desire to comply with the tax laws regarding the industry. Through this extended outreach, we hope to help small business owners and others fully understand the unique tax rules before there are any compliance issues.”

“Since the unique circumstances of the cannabis industry can make tax preparation challenging, I hope that new and experienced business owners take my advice in this post and use our resources to ensure they understand their tax obligations and avoid penalties associated with non-compliance,” the blog post concludes. “We’re always here to help with tools, information and guidance.”

This is yet another signal that while marijuana remains federally illegal, agencies are increasingly recognizing that a policy shift is happening in states and may well be on the horizon at the congressional level.

As leadership in the House and Senate work to advance legislation to deschedule cannabis, lawmakers have also pushed to enact clear, statutory protections for financial institutions that work with state-legal marijuana businesses. And that would be accomplished through House-passed standalone legislation, or an amendment that was attached to a defense spending bill this week.

In the interim, banks and credit unions are operating under 2014 guidance from the Financial Crimes Enforcement Network (FinCEN) that lays out reporting requirements for those that choose to service the marijuana industry. FinCEN released a report last week showing that there were 706 financial institutions that said they were actively serving cannabis clients as of the last quarter.

IRS separately hosted a forum last month dedicated to tax policy for marijuana businesses and cryptocurrency.

The seminar, which was presented by a representative of the National Association of Tax Professionals (NATP), examined issues such as allowable tax deductions while cannabis remains federally illegal and how different states approach taxing marijuana. It also covered issues related to paying taxes on earnings in Bitcoin and other forms of digital currency.

Earlier this year, IRS Commissioner Charles Rettig told Congress that the agency would “prefer” for state-legal marijuana businesses to be able to pay taxes electronically, as the current largely cash-based system under federal cannabis prohibition is onerous and presents risks to workers.

Former Treasury Secretary Steven Mnuchin said in 2019 that he’d like to see Congress approve legislation resolving the cannabis banking issue and he pointed to the fact that IRS has had to build “cash rooms” to deposit taxes from those businesses as an example of the problem.

IRS released updated guidance on tax policy for the marijuana industry last year, including instructions on how cannabis businesses that don’t have access to bank accounts can pay their tax bills using large amounts of cash.

The update appears to be responsive to a Treasury Department internal watchdog report that was released earlier in the year. The department’s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publicize guidance specific to the marijuana industry.”

Harris’s predecessor at IRS SB/SE also participated in an informational webinar in December, offering candid insights on a variety of cannabis industry issues from the federal perspective.

Marijuana Arrests Dropped Sharply In 2020 As Both COVID And Legalization Spread, FBI Data Shows

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Massachusetts Lawmakers Discuss Drug Decriminalization And Safe Injection Sites At Hearing

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Massachusetts lawmakers on Monday heard testimony on separate proposals to decriminalize drug possession and establish a pilot program for safe injection facilities where people could use illicit substances in a medically supervised environment to prevent overdose deaths and facilitate treatment.

The state legislature’s Joint Committee on Mental Health, Substance Use and Recovery held a hearing on the harm reduction proposals, with experts and people personally impacted by substance misuse advocating for new approaches to drugs that destigmatize addiction and offer people resources outside of a criminal justice context.

The decriminalization bill would replace criminal penalties for the possession of any controlled substance with a civil fine of up to $50. To avoid the fine, individuals could enroll in a “needs screening to identify health and other service needs, including but not limited to services that may address any problematic substance use and mental health conditions, lack of employment, housing, or food, and any need for civil legal services.”

For the safe injection site legislation, the state would establish a 10-year pilot program where at least two facilities would “utilize harm reduction tools, including clinical monitoring of the consumption of pre-obtained controlled substances in the presence of trained staff, for the purpose of reducing the risks of disease transmission and preventing overdose deaths.”

A separate, less far-reaching bill that was added to the agenda in a late addition would direct the Department of Public Health to simply “evaluate the feasibility” of safe consumption sites and then report back to lawmakers by July 31, 2022..

The joint committee listened to academics, health professionals, lawmakers discuss the reform proposals but did not take immediate action on any of the legislation. It’s unclear when the bills will be taken up again for further consideration.

“By every metric, the war on drugs has been a catastrophic failure,” Rep. Mike Connolly (D) said. “In the United States and here in Massachusetts, the criminalization of drug possession is a major driver of mass incarceration. We know that black people have been incarcerated at a rate eight times higher than white people, and there’s no question that the criminalization of substance use issues has contributed to these terrible disparities.”

Connolly is also the sponsor of legislation that received a Joint Judiciary Committee hearing in July on  studying the implications of legalizing psychedelics like psilocybin and ayahuasca.

Officials with at least one Massachusetts city, Somerville, said that there are plans in the work to launch a safe injection facility in the jurisdiction. And they want to see the statewide bill pass to provide additional protections against being federally penalized.

“State legislation, wielding its constitutionally granted powers to enact laws for public health and safety, has the ability to greatly minimize these risks through legislation authorizing a pilot of safe consumption sites,” Hannah Pappenheim, assistant city solicitor at the City of Somerville, said. “In addition, state legislation would also minimize the risk of costly—but more importantly, lengthy—litigation.”

The official noted that a separate, Pennsylvania-based case on the legality of safe injection sites has been ongoing in federal courts for years at this point.

A coalition of 80 current and former prosecutors and law enforcement officials—including one who is President Joe Biden’s pick for U.S. attorney of Massachusetts—recently filed a brief urging the Supreme Court to take up the case.

Xavier Bacerra, the Biden administration’s secretary of health and human services, was among eight top state law enforcement officials who filed an earlier amicus brief in support of the Philadelphia-based Safehouse’s safe injection site plan when he served as California’s attorney general.

“State legislation paves the way for a more expedient process in Somerville, and of course elsewhere in the Commonwealth,” Pappenheim said.

Somerville Mayor Joseph Curtatone (D) said at Monday’s hearing that “it’s important for Massachusetts to finally lead—not just compiling, but implementing a strategy that reduces harm and save lives.” He conceded that he previously opposed the concept of allowing safe consumption sites; but his personal experience knowing people in his immediate family who suffered from addiction—as well as his own review of the scientific literature on harm reduction alternatives to criminalization—led him to embrace the reforms.

Massachusetts lawmakers advanced similar legislation last year, but it was not ultimately enacted.

The governor of neighboring Rhode Island signed a bill in July to establish a safe consumption site pilot program where people could test and use currently illicit drugs in a medically supervised environment. It became the first state in the country to legalize the harm reduction centers. It’s not clear whether the Department of Justice will seek to intervene to prevent the opening of such facilities in that state.

Oamshri Amarasingham, deputy legislative director of the ACLU of Massachusetts, voiced support for both reform proposals at Monday’s hearing and told WGBH that establishing a safe injection site pilot program “is one piece of that puzzle” that is “critically important and that’s had great success in other countries.”

Shaleen Title, a former Massachusetts cannabis commissioner who now heads the Parabola Center, juxtaposed how laws handle substances like caffeine, alcohol and nicotine differently from currently illegal drugs.

“What separates that from when we have these illicit drugs, where handcuffs and cages are involved, and what led that to be? The reason has nothing to do with science, or evidence or the relative dangers of those drugs,” she said. “The reason is because—and this is well-documented—those drugs could be scapegoated and blamed on their association with indigenous and Indian and Mexican and Chinese and other cultures, and then used to target communities of color, particularly black and Latino people nationally and here in Massachusetts.”

At the same time that Massachusetts legislators are looking into harm reduction and broad drug decriminalization, local activists in the state have also been pursuing psychedelics reform.

Three Massachusetts cities—Northampton, Somerville and Cambridge—have each passed resolutions to deprioritize enforcement of laws against the possession, use and distribution of a wide range of psychedelics and other drugs. The Easthampton City Council is also exploring a resolution to decriminalize a wide range of entheogenic substances, with a meeting set for Friday.

Marijuana Arrests Dropped Sharply In 2020 As Both COVID And Legalization Spread, FBI Data Shows

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Marijuana Arrests Dropped Sharply In 2020 As Both COVID And Legalization Spread, FBI Data Shows

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Marijuana arrests declined significantly in 2020 amid the coronavirus pandemic, newly released FBI data shows.

There were 1,155,610 drug-related arrests overall last year, with cannabis sales and possession busts accounting for just over 30 percent (or 350,150) of those cases. The vast majority were for marijuana possession alone.

The agency’s data shows that there was a cannabis arrest every 90 seconds in the country in 2020, and there was a drug-related arrest every 27 seconds.

While these figures still highlight the rampant, ongoing criminalization of cannabis in states across the U.S., it’s a substantial deescalation compared to 2019, when FBI reported a total of 545,601 marijuana arrests. That amounted to a cannabis bust every 58 seconds.

Put another way, there was a 36 percent decrease in cannabis cases from 2019 to 2020. And while the federal agency doesn’t attempt to explain the statistical shift, there are a number of factors that could help explain it.

One of the more obvious societal changes during that timeframe is the COVID-19 health crisis, which involved social distancing requirements and generally discouraged people from being out in public where they might be at higher risk of being arrested for simple possession.

But advocates have also pointed out that the marijuana reform movement could be playing a role. Illinois’s adult-use cannabis law took effect at the beginning of 2020, for example. Hawaii, New Mexico and North Dakota also enacted decriminalization of marijuana possession in 2019, and Virginia followed suit the next year.

In Arizona, limited cannabis possession was legalized for adults starting on November 30, 2020 following voter approval of a reform initiative earlier that month.

“As more states move toward the sensible policy of legalizing and regulating cannabis, we are seeing a decline in the arrest of non-violent marijuana consumers nationwide,” NORML Executive Director Erik Altieri told Marijuana Moment. “The fight for legalization is a fight for justice. While these numbers represent a historic decline in arrests, even one person being put into handcuffs for the simple possession of marijuana is too many.”

Despite the decline in cannabis busts, the new data shows that American law enforcement still carried out more arrests for marijuana alone last year than for murder, rape, robbery, burglary, fraud and embezzlement combined.

It should be noted that not all local police participate in FBI’s reporting program, so these figures are not holistic and are estimates the agency makes based on those that do submit data.

The country had seen a consistent decline in cannabis arrests for roughly a decade prior to 2016, when those cases started to rise up until 2019.

Observers expect to see the downward trend in cannabis busts continue as more states move to end prohibition and law enforcement deprioritizes marijuana-relate cases. In New York, for example, police received new guidance this year stipulating that adults 21 and older can possess certain amounts of marijuana and consume it in places where tobacco use is permitted.

That directive alone seems to have led to a dramatic decrease in cannabis arrests in New York City.

Federal marijuana trafficking cases also continued to decline in 2020 as more states have moved to legalize, an analysis from the U.S. Sentencing Commission (USSC) that was released in June found.

Federal prosecutions of drug-related crimes overall increased in 2019, but cases involving marijuana dropped by more than a quarter, according to an end-of-year report released by Supreme Court Chief Justice John Roberts in December.

A study released by the Cato Institute in 2018 found that “state-level marijuana legalization has significantly undercut marijuana smuggling.”

New York Governor Says Marijuana Legalization Will Create ‘Thousands’ Of Jobs And Touts Regulatory Appointments

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