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IRS Releases Tax Guidance For Marijuana Industry

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

Because marijuana remains federally illegal, the industry is largely deprived of tax benefits extended to operators in other markets—but it still has an obligation to pay taxes and properly report transactions, IRS said.

“A key component in promoting the highest degree of voluntary compliance on the part of taxpayers is helping them understand and meet their tax responsibilities while also enforcing the law with integrity and fairness to all,” the new memo states. “Businesses that traffic marijuana in contravention of federal or state law are subject to the limitations” in IRS code.

This update appears to be responsive to a Treasury Department internal watchdog report that was released in April. 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.”

The new guidance briefly covers the rules for income reporting, cash payment options, estimating tax payments and keeping financial records.

In an attached Frequently Asked Questions document, IRS explains how court rulings have clarified that businesses are required to pay taxes even if they’re selling products considered illegal under state or federal law. It also explains that marijuana companies are eligible for payment plans if they’re unable to pay their taxes in full. Further, it states that cannabis operations are subject to the same penalties as any other business that come about during an income audit.

A topic of particular interest for the marijuana market concerns tax benefits. An IRS code known as 280E “disallows all deductions or credits for any amount paid or incurred in carrying on any trade businesses that consist of illegally trafficking in a Schedule I or II controlled substance within the meaning of the federal Controlled Substances Act.”

“Section 280E does not, however, prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income,” IRS said, adding that “taxpayers who sell marijuana may reduce their gross receipts by the cost of acquiring or producing marijuana that they sell, and those costs will depend on the nature of the business.”

“Accordingly, a marijuana dispensary may not deduct, for example, advertising or selling expenses. It may, however, reduce its gross receipts by its cost of goods sold, as calculated pursuant to Internal Revenue Code section 471,” it said.

In other words, while cannabis businesses aren’t eligible for most traditional deductions, they are able to calculate the cost of goods and get some tax relief.

But pending a change in the federal legal status of marijuana, or statutory changes at the agency level, the cannabis industry will continue to be at a disadvantage. That would change if Congress passed a marijuana legalization bill like the one the House is set to vote on later this month.

FDA Teaches Marijuana Growers And Researchers How To Protect Trade Secrets From Competitors

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Sixth Minnesota House Committee Approves Marijuana Legalization Bill On Its Path To The Floor

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A bill to legalize marijuana in Minnesota is going through a thorough vetting process, with a sixth House committee on Wednesday giving the reform proposal a green light following a hearing.

House Majority Leader Ryan Winkler (D), Speaker Melissa Hortman (D) and other lawmakers filed the measure in February. It would allow adults 21 and older to purchase and possess up to 1.5 ounces of cannabis and cultivate up to eight plants, four of which could be mature.

Days after a separate panel approved the legislation with amendments, the House Judiciary Finance and Civil Law Committee passed it in a 9-7 vote.

“The purpose of House File 600 is to eliminate the harm that cannabis has in our society,” Winkler said of the bill at the hearing. “The primary harm that cannabis poses in Minnesota is the prohibition and criminal enforcement of cannabis.”

“The goal of House File 600 is to shift in a legal marketplace that is policed and over-policed disproportionately and instead to create a policy of repair, an opportunity for those most adversely affected by the war on drugs,” he said.

The House Environment and Natural Resources Finance and Policy Committee was the last body to approve the bill, on Monday, and members there adopted a number of changes to the proposal. For example, it now stipulates that members of a cannabis advisory council established under the bill could not serve as lobbyists while on the panel and for two years after they end their service.

Before that hearing, the House Agriculture Finance and Policy Committee, the Workforce and Business Development Finance and Policy Committee, the Labor, Industry, Veterans and Military Affairs Finance and Policy Committee and the Commerce Finance and Policy Committee each advanced the measure.

Its next stop is the State Government Finance and Elections Committee.

Winkler recently said that he expects the legislation to go through any remaining panels by the end of April, with a floor vote anticipated in May.


Marijuana Moment is already tracking more than 900 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

Still, even if the legislation does make it all the way through the House, it’s expected to face a significant challenge in the Republican-controlled Senate, where lawmakers have signaled that they’re more interested in revising the state’s existing medical cannabis program than enacting legalization of adult use.

After the New York legislature approved a recreational cannabis legalization bill—which the governor promptly signed into law—Winkler said that Minnesota is “falling behind a national movement towards progress.”

“MN has some of the worst criminal justice disparities in the country, and legalizing cannabis & expunging convictions is a first step towards fixing that,” he tweeted.

The majority leader’s bill as introduced was identical to a proposal he filed last year, with some minor technical changes. Winkler, who led a statewide listening to gather public input ahead of the measure’s introduction, called it the “best legalization bill in the country” at the time. It did not advance in that session, however.

Under the legislation, social equity would be prioritized, in part by ensuring diverse licensing and preventing the market from being monopolized by corporate players. Prior marijuana records would also be automatically expunged.

On-site consumption and cannabis delivery services would be permitted under the bill. And unlike in many legal states, local municipalities would be banned from prohibiting marijuana businesses from operating in their areas.

Retail cannabis sales would be taxed at 10 percent. Part of that revenue would fund a grant program designed to promote economic development and community stability.

The bill calls for the establishment of a seven-person Cannabis Management Board, which would be responsible for regulating the market and issuing cannabis business licenses. It was amended in committee month to add members to that board who have a social justice background.

People living in low-income neighborhoods and military veterans who lost honorable status due to a cannabis-related offense would be considered social equity applicants eligible for priority licensing.

Cannabis retails sales would launch on December 31, 2022.

Gov. Tim Walz (D) is also in favor of ending marijuana prohibition, and in January he called on lawmakers to pursue the reform as a means to boost the economy and promote racial justice. He did not include a request to legalize through his budget proposal, however.

Walz did say in 2019 that he was directing state agencies to prepare to implement reform in anticipation of legalization passing.

Winkler, meanwhile, said in December that if Senate Republicans don’t go along with the policy change legislatively, he said he hopes they will at least let voters decide on cannabis as a 2022 ballot measure.

Heading into the 2020 election, Democrats believed they had a shot of taking control of the Senate, but that didn’t happen.

The result appears to be partly due to the fact that candidates from marijuana-focused parties in the state earned a sizable share of votes that may have otherwise gone to Democrats, perhaps inadvertently hurting the chances of reform passing.

In December, the Minnesota House Select Committee On Racial Justice adopted a report that broadly details race-based disparities in criminal enforcement and recommends a series of policy changes, including marijuana decriminalization and expungements.

Alabama Medical Marijuana Bill Moves Closer To Floor Vote With House Committee Action

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Alabama Medical Marijuana Bill Moves Closer To Floor Vote With House Committee Action

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An Alabama House committee on Wednesday amended a medical marijuana legalization bill that already passed the Senate. Members also took public testimony in advance of an expected Thursday vote to send the revised legislation to the House floor.

This hearing of the House Health Committee comes one week after a separate panel in the body amended and cleared the bill.

Sponsored by Sen. Tim Melson (R), the legislation would allow people with qualifying conditions to access cannabis for therapeutic purposes. The full Senate approved the bill last month.

“I just want to take [cannabis] to the patients that need it. I want to see people get relief,” the senator said at the meeting. He also made the case that allowing legal access can mitigate opioid overdose deaths.

Melson is the same lawmaker who sponsored similar legislation that was approved by the full Senate last year but which later died without any House votes amid the coronavirus pandemic.

This latest proposal would establish an Alabama Medical Cannabis Commission to implement regulations and oversee licensing.

To qualify for the program, patients would have to be diagnosed with one of about 20 conditions, including anxiety, sleep disorders, post-traumatic stress disorder and intractable pain. Regulators would not be able to independently add additional conditions, leaving that decision up to lawmakers.

The House Judiciary Committee approved 10 amendments to the legislation during last week’s hearing. For example, members agreed to scrap provisions providing reciprocity for out-of-state patients and reducing the percentage of marijuana tax revenue that would go to cannabis research from 30 to 15 percent.

Those amendments were integrated into a new substitute version of the bill adopted by the Health panel, with additional revisions such as removing anxiety and adding depression and Parkinson’s disease as qualifying conditions for medical cannabis. The committee voted to accept the substitute version for consideration before going into testimony.

Time was evenly divided between supporters and opponents. By and large, the conversation revolved around personal anecdotes about the medical benefits and risks of marijuana.

More amendments were added following the testimony. One change would add an annual registration fee for physicians who recommend cannabis. Another would give the state attorney general’s office access to a patient registry database.


Marijuana Moment is already tracking more than 900 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

Members further approved an amendment to remove fibromyalgia and menopause from the list of qualifying conditions and another to expand the number of institutions that are eligible for grants to research marijuana. A revision to develop a uniform flavor for all cannabis products was also accepted.

Additionally, an amendment was approved to require dispensaries to have 24-hour security cameras operating in their facilities. These changes are all being added to a new substitute that the panel will take up and vote on Thursday.

Because the proposal has been amended, it would go back to the Senate for final consideration if it’s passed in the House before being sent to the governor’s desk.

Advocates say they’re encouraged that medical cannabis reform is advancing in Alabama, but they’ve raised concerns about a number of aspects of the bill.

One problematic provision, advocates say, is that patients with chronic or intractable pain could only be recommended medical marijuana in cases where “conventional therapeutic intervention and opiate therapy is contraindicated or has proved ineffective.”

The bill also prohibits raw cannabis, smoking, vaping and candy or baked good products. Patients would instead be allowed to purchase capsules, lozenges, oils, suppositories and topical patches.

Patients would be allowed to purchase and possess up to “70 daily dosages of medical cannabis.” Under an amendment approved on the Senate floor, the maximum daily dose was reduced from 75 to 50 milligrams. However, the amendment’s sponsor said it could be increased to 75 milligrams in some circumstances.

The revision also calls for a label on marijuana products to indicate that cannabis can cause drowsiness.

It also calls for a nine percent gross proceeds tax on medical marijuana sales.

Patients, caregivers and and medical cannabis businesses would receive legal protections under the proposal, preventing them from being penalized for activities authorized by the state.

For physicians to be able to recommend cannabis to patients, they would have to complete a four-hour continuing education course and pass an exam. The course would cost upwards of $500 and doctors would also be required to take refresher classes every two years.

Under the bill, regulators would be tasked with developing restrictions on advertising and setting quality control standards. Seed-to-sale tracking and laboratory testing would be mandated.

Other changes approved in the Senate would add language to stipulate that gelatinous cannabis products cannot be sugar coated and insert provisions promoting good manufacturing practices and tamper-evident packaging.

Applications for cannabis business licenses would have to be accepted starting September 1, 2022 and then proceeded within 60 days.

The commission would be required to approve at least four cultivators, up to four processors, up to four dispensaries for the first year of implementation (more could be approved after that point depending on demand) and as many as five vertically integrated operators.

This bill’s reintroduction has been greatly anticipated by advocates. The Senate approved a separate medical cannabis bill in 2019, but the House later severely compromised it. The legislation as enacted would not have legalized patient access; rather, it set up a study commission to explore the issue and make recommendations.

The commission came back with its report in December 2019, with members recommending that medical marijuana be legalized.

There could be additional pressure on the legislature to enact legalization given that voters in neighboring Mississippi approved a medical cannabis reform initiative during the November election.

Separately, the Alabama Senate Judiciary Committee approved a bill last month to decriminalize possession of up to two ounces of cannabis, making it punishable by a $250 fine without the threat of jail time.

Majority Of Connecticut Residents Back Marijuana Legalization And Expungements, Poll Finds As Reform Bills Advance

Photo courtesy of Philip Steffan.

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Former Gov. Rick Perry Urges Texas Lawmakers To Pass Psychedelics Study Bill

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“All of that properly done in the right type of clinical setting will save a multitude of lives,” Perry said. “I’m convinced of it. I have seen it enough of these young men.”

By Patrick Svitek, The Texas Tribune

Rick Perry, in a rare return to policy debates in Austin, is teaming up with a Democratic state lawmaker to push for psychedelic drug therapy for veterans struggling with post-traumatic stress disorder.

The former Republican governor is throwing his support behind a bill by state Rep. Alex Dominguez, D-Brownsville, that calls for a clinical study of psilocybin—the active ingredient in “magic mushrooms”—to treat PTSD in veterans.

“To me, this may be one of the most hopeful pieces of legislation that the members of the Legislature have the opportunity to consider this session,” Perry said in an interview Tuesday.

Some studies have suggested that psilocybin could be safe and effective in treating mental health disorders like depression, while calling for larger studies with more thorough methods.

Perry said he has “historically been a very anti-drug person” and still firmly opposes legalization for recreational uses. However, he said he has seen through his longtime advocacy for veterans how psychedelic drugs can provide relief to former service members who have exhausted other options — and are traveling to other countries, like Mexico, to receive treatment.

“All of that properly done in the right type of clinical setting will save a multitude of lives,” Perry said. “I’m convinced of it. I have seen it enough of these young men.”

Perry is set to join Dominguez for a news conference on his proposal Wednesday morning at the state Capitol. The news conference will also be attended by veterans that Perry has gotten close to over the years, including retired Navy SEAL Morgan Luttrell and Dakota Meyer, a Marine veteran and Medal of Honor recipient.

Dominguez’s House Bill 1802 would direct the Health and Human Services Commission to conduct the clinical study of psilocybin in partnership with a health sciences university and a Veterans Affairs hospital. The proposal would also ask HHSC to do a literature review—a survey of prior studies—of using not just psilocybin but also MDMA and ketamine to treat PTSD in veterans.

HHSC would have to submit quarterly progress reports on its study, and it would have a deadline of Dec. 1, 2024, to deliver final findings to the the so-called “Big Three”—the governor, lieutenant governor and House speaker—as well as members in both chambers.

The bill was referred to the House Public Health Committee last month but has not received a hearing yet.

Texas has largely avoided loosening its drug laws in recent years as a growing number of states have legalized marijuana for recreational use. The state has legalized marijuana with limited levels of THC—the psychoactive ingredient in marijuana that makes people feel high—for people with certain debilitating illnesses, but eligibility is limited and relatively few people have signed up.

Noting the influence that the Big Three could have if they get behind a proposal, Perry said he’s talked with the offices of Gov. Greg Abbott and Lt. Gov. Dan Patrick and that the speaker’s office has been briefed on it. He added that he is hoping that Republicans can “get comfortable [that], ‘Hey, this is not some recreational drug thing,'” but a life-changing treatment for veterans when handled carefully.

Dominguez said in an interview that he has found that colleagues on both sides of the aisle are “very supportive” of studying the issue.

“I think in general we’re supportive of veterans issues and certainly there’s maybe a generational discussion to be had… But I found most members want to hear the science,” Dominguez said, emphasizing the study would go through a “controlled process” and that there would be “a number of safeguards in place to make sure that nobody abuses this and we learn the efficacy.”

The lawmaker said his interest in the issue comes from his time as a prosecutor in Cameron County, which set up a veterans treatment court in 2014.

Perry has largely stayed out of state legislative matters since leaving office in 2015, unsuccessfully running for president in 2016 and then joining former President Donald Trump’s Cabinet as energy secretary. He stepped down as energy secretary in late 2019.

But Perry is not unfamiliar with the Legislature, though, and particularly the House. He served there from 1985 to 1991—first as a Democrat and then as a Republican.

This article originally appeared in The Texas Tribune.

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